The Swiss National Bank (SNB) has announced a third interest rate cut under its president Martin Schlegel. It is lowering the key interest rate by 25 basis points, from 0.25% to 0%.
The move had been expected by most. As usual, Reuters surveyed economists in advance; three-quarters of them expected a cut of 25 basis points to 0%, while a quarter even anticipated negative interest rates. Are such rates possible by year-end?
The SNB notes that negative interest rates were an important tool between 2015 and 2022 to ensure price stability during an exceptional phase. However, it is aware that they can have unwanted side effects and present challenges for many economic actors. Still, Martin Schlegel stated at the press conference on Thursday, June 19:
"Uncertainty regarding inflation trends remains elevated. We will continue to monitor the situation and, if necessary, adjust our monetary policy to ensure price stability in the medium term." This means the SNB is not ruling out further rate cuts if needed. A key concern among monetary authorities currently is deflation – i.e., negative inflation below 0%. While it may lead to falling prices, it also results in reduced investment, rising unemployment, and dampened corporate performance.
This is already the sixth consecutive rate cut. The new key rate of 0% takes effect on June 20.
One of the SNB’s core responsibilities as Switzerland’s central bank is to ensure price stability. Its monetary policy aims to maintain the value of money for individuals and businesses in Switzerland and to support the country's economic development.
The SNB sees a decline in inflationary pressure compared to the previous quarter. Inflation fell from 0.3% in February to -0.1% in May, mainly due to price developments in tourism and petroleum products. In the medium term, the new inflation forecast has changed little compared to March. Inflation remains within the targeted price stability range – a target band of 0 to 2%.
The SNB sees global economic growth weakening over the next few quarters, accompanied by inflation in the U.S. For Switzerland, it still expects GDP growth of 1 to 1.5% in 2025 – the same as for 2026. The SNB views economic prospects as uncertain, particularly due to trade policy tensions and international developments. The rate cut is intended to support Switzerland’s economic development and ensure price stability – with a projected 0.2% inflation rate for all of 2025.
The markets had anticipated the rate cut. The Swiss franc is likely to weaken slightly, which is good news for export-oriented industries, as Swiss goods may become cheaper for foreign buyers. For 2025, the SNB expects inflation in Switzerland to be 0.2% – 0.2% lower than in its last forecast in March. For 2026, it expects 0.5%.
"Without today’s rate cut, the forecast would be lower," writes the SNB. It expects Swiss GDP growth to slow after a strong first quarter, projecting subdued growth later in the year due to the recent franc appreciation and weaker international demand. Martin Schlegel: "With today’s rate cut, we are counteracting lower inflationary pressure."
Domestically, the cut could lead to higher prices for imported goods, such as fashion, electronics, and travel abroad, even with a slight weakening of the franc.
The reference interest rate for rents was lowered in early March and currently stands at 1.5%. Tenants whose rents are based on a reference rate of 1.75% or more can request a rent reduction. However, this reference rate reacts more slowly and does not automatically follow the key interest rate. The Federal Office for Housing kept it at 1.5% as of early June and will announce the next update on September 1.
If you’ve financed your home with a SARON mortgage, you benefit directly, as the SARON is tied to the key rate. The latest cut makes SARON mortgages even cheaper – although with the rate now at 0%, the floor has been reached. A SARON mortgage currently costs at least 0.96% (0.2% SARON + 0.8% to 1.3% margin, depending on your creditworthiness).
The announced cut is moderate and had already been priced in by the market. If you’ve financed or plan to finance your home with a fixed-rate mortgage, little is likely to change. Mortgage rates dropped significantly in 2024 and are now very low again after a rise in early 2025. Many financial experts believe fixed-rate mortgages have reached a floor. In light of the rate cut, they’re expected to decline only slightly further. If you’re flexible on timing, it might be worth watching the market closely and benefiting from possibly lower rates.
From October/November 2023 to January 2025, SARON mortgages were more expensive than fixed-rate mortgages – an unusual situation that has now reversed. On December 20, 2024, a 10-year fixed-rate mortgage with UBS key4 mortgages cost at least 1.26%. Six months later, on June 19, 2025, it cost at least 1.34%*. It remains more expensive than a SARON mortgage.
*Indicative rates as of June 19, 2025, 4:00 PM. Based on: Zurich canton, loan CHF 500,000, affordability 20%, loan-to-value 50%, payout on June 20, 2025. These are not binding financing offers.
The SARON reference interest rate is directly linked to the key interest rate and may fluctuate. Therefore, SARON mortgages are suitable for homeowners who can cope with interest rate fluctuations and have financial flexibility. Those who prioritize security and want to budget precisely over the long term are less exposed to fluctuations with a fixed-rate mortgage.
The 0.25% rate cut makes assets moderately more attractive. Demand for real estate is expected to remain high. The UBS Real Estate Bubble Index assesses the risk of a potential property bubble in Switzerland. According to UBS, home prices rose by 1.5% in Q1 2025 compared to the previous quarter. Year-over-year, home prices increased 3.2%, or 2.8% adjusted for inflation.
The index has now hit a trough and rose moderately from 0.25 in December to 0.29 in March 2025 – still very low compared to its 1990s peak (2.34), when Swiss property lost up to 40% in value.
UBS continues to assess the bubble risk as "moderate." It deems a price correction unlikely, especially due to expected population and economic growth. For 2025, UBS forecasts home prices to rise by 3 to 4% on average nationwide. However, rising uncertainty about jobs, incomes, and affordability may negatively impact demand.
Experts see a risk of overheating almost exclusively in tourist areas of Graubünden – due to the second-home boom and limited supply.
As mentioned above, most market participants had expected the cut. The SNB now sees inflation outlooks as lower than in March, writing: "The economic outlook for Switzerland remains uncertain." Q1 2025 saw strong GDP growth, but Petra Tschudin, SNB Board Member, said:
"After the strong first quarter, growth is likely to ease and remain subdued in the rest of the year due to the stronger franc and weaker international demand." For all of 2025, the SNB expects GDP growth of 1–1.5% and a slight rise in unemployment.
Higher U.S. tariffs are likely to dampen global trade and reduce U.S. consumer purchasing power. Ongoing geopolitical uncertainty is also negatively impacting global investment. These and other factors make mortgage rate forecasts difficult. Mortgage rates took a significant dive after the surprise SNB cut in December 2024 and are now expected to remain low or decline slightly. The SNB’s next policy update is scheduled for September 2025.
Our mortgage rate forecast through end of 2025:
*Indicative interest rates as of June 19, 2025 at 6:00 p.m. The interest rates were determined by UBS key4 mortgages based on the following parameters: Canton of Zurich, loan amount CHF 500,000, affordability 20 percent, loan-to-value ratio 50 percent, disbursement date June 20, 2025. These interest rates do not constitute a binding financing offer.
Long-term studies show that money market mortgages like SARON have historically been cheaper than fixed-rate mortgages. From October/November 2023 to January 2025, however, both short- and long-term fixed rates were cheaper than SARON – an unusual phase that ended in January.
Swiss mortgage rates fell sharply in Q2 2025 and are approaching their year-end 2024 lows again. Most market observers still expect rates to remain low or decrease slightly in 2025.
Now is a good time to finance or refinance a home with attractive mortgage terms. Historical mortgage trends suggest a fixed mortgage with a 5- or 10-year term could be a wise choice.
When choosing a model, always consider your personal and financial situation and seek expert advice – for example, from our real estate specialists.
{{mortgage}}
It’s wise not to rely on a single mortgage. Spread your financing across different models and terms to diversify your interest rate risk and avoid renewing the entire loan at an unfavorable time, such as in a high-rate environment. UBS key4 mortgages recommends the following strategies:
The UBS Real Estate Bubble Index sees favorable conditions for sellers. UBS expects a 3–4% price increase in 2025. So if you’re planning to sell, now is a good time. Use our free selling price consultation or our realtor recommendations. Our experts offer independent advice and connect you with realtors who know your local market and will guide you professionally through the sales process.
How you finance or refinance your home depends on much more than just interest rates. Your financial situation, future plans, risk tolerance, and rate expectations all matter when choosing the right mortgage and term. Get expert advice and compare offers, services, and rates. The seemingly cheapest option may not always be the best for you.
