Swiss Mortgage Trends: 10-Year Terms Gain Popularity

Swiss Mortgage Trends: 10-Year Terms Gain Popularity

In the latter half of 2024, Swiss mortgage holders increasingly chose 10-year terms, with over half opting for longer commitments amid low interest rates.

In the latter half of 2024, a notable shift has occurred in the Swiss mortgage landscape, with borrowers increasingly gravitating towards longer-term mortgage options. This trend is underscored by a significant uptick in the selection of ten-year fixed-rate mortgages, which now constitute over half of the total mortgage volume brokered, as reported in the “Financing and Real Estate Update” by Moneypark. The allure of persistently low interest rates has undoubtedly played a pivotal role in this resurgence.

During the low interest rate environment of 2020 and 2021, the prevalence of ten-year fixed-rate mortgages peaked, only to subsequently decline to below 30 percent. However, despite two additional cuts to the key interest rate in the latter part of the year, SARON mortgages have not emerged as the preferred choice among borrowers. The current exceptionally low interest rate milieu has catalyzed a marked increase in the conclusion of fixed-rate mortgages with terms extending ten years or more, as elucidated by Moneypark.

This phenomenon is particularly pronounced in the French-speaking regions of Switzerland, where a striking 62 percent of mortgages now feature a term of ten years or longer. In contrast, German-speaking Switzerland reports a slightly lower figure of 51 percent, with an overall national average of 55 percent. When juxtaposed with the first half of the year, the increase in long-term mortgage agreements across Switzerland has surged by approximately one-third.

In terms of market dynamics, banks have successfully regained a substantial share of the mortgage lending market, shifting the balance away from pension funds. Following a rather cautious approach in the first half of the year, banks have become increasingly proactive, leveraging attractive lending conditions to expand their share of the brokered mortgage volume, particularly in German-speaking regions. Specifically, the proportion of mortgages brokered by banks has risen from 51 percent to an impressive 60 percent in the latter half of the year. Conversely, the share attributed to pension funds has diminished significantly, halving to a mere 9 percent, while the insurers’ share has remained stable at 31 percent.

This strategic repositioning can be attributed to the fact that many pension funds have successfully met their target volumes in recent years. Consequently, their growth aspirations for 2024 were largely fulfilled in the first half of the year, prompting a more cautious stance in the latter half. As the Swiss mortgage market continues to evolve, it remains to be seen how these trends will shape the future landscape of home financing in the country.

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