Stronger franc, more expensive mortgages and fewer fees

The Swiss National Bank raised its key interest rate to 0.5 percent today. The step was expected and will have consequences for the entire economy.

Thomas Jordan, President of the Swiss National Bank, at a media conference. The SNB has announced that it will raise its key interest rate to 0.5 percent. – Keystone


the essentials in brief

  • The Swiss National Bank today increased its key interest rate from -0.25 to 0.5 percent.
  • Economists from various banks explain to what that means in concrete terms.
  • The Swiss franc could strengthen, but interest on savings follows the increase only very slowly.

The key interest rate of the Swiss National Bank is back in positive territory for the first time in eight years. But what does the new key interest rate of 0.5 percent mean specifically for the Swiss? asked experts.

Alessandro Bee, economist at UBS and responsible for forecasts for the Swiss economy, puts it: “Today’s interest rate hike will slow down the Swiss economy and also reduce inflationary pressure a little.”

Alessandro Bee UBS
Alessandro Bee, economist at UBS. – Screenshot Youtube/Swissquote

He expects the franc to strengthen against the euro. This will cool the economy, says Bee, and in a year or two there will be less inflation. “At the same time, a lower euro-franc exchange rate also means that imported goods from the euro area become cheaper.”

Holidays in the euro zone, for example in France, Italy or Spain, should therefore become significantly cheaper. Shopping on the other side of the border should also be worthwhile.

In the case of mortgage interest rates, the increase in the base rate is not likely to cause much movement, says Bee: “The interest rate hikes by the SNB were expected by the capital market.” The interest on deposits and savings should only rise “very slowly”, as the past has shown.

The SNB will probably raise the key interest rate again

According to Maxime Botteron, economist at Credit Suisse, the strong franc is not a cause for concern for the SNB: it was not even mentioned in the statement. In general, the National Bank seems unconcerned about inflation spiraling out of control.

David Marmet
David Marmet, Chief Economist Switzerland at Zürcher Kantonalbank. – Zürcher Kantonalbank

The chief economist at Zürcher Kantonalbank, David Marmet, also says: Thanks to early steps, the SNB can continue its monetary policy with a “steady hand”. Nevertheless, all economists agree: it will not be the last step in the increase. The SNB has also promised this.

In December and March, the central bank will probably raise its key interest rate again by 75 and 50 basis points respectively. As a result, the Saron (Swiss Average Rate Over Night) is also getting higher, as Marmet notes. Mortgages tied to it are therefore likely to increase, emphasizes Alessandro Bee from UBS.

What do you think of the end of negative interest rates?

Fredy Hasenmaile, Head of Real Estate Analysis at Credit Suisse, explains that the flood of Saron mortgage holders should then ebb: “This has taken on large volumes in recent months because the Saron mortgage was by far the cheapest mortgage.”

Consumer protection has already asked the banks to increase interest on savings accounts and lower fees. Otherwise, savers face “massive asset losses,” wrote consumer protection in a statement. Switching to a bank with higher interest rates is worth it in the long term.

Sara Stalder, Director of the Consumer Protection Foundation. Before the new Swisspass is issued, all questions regarding data protection should be clarified. – Keystone

According to the head of consumer protection, Sara Stadler, the banks have enough leeway: “Three years ago, for example, the interest rate for ten-year fixed-rate mortgages was around one percent; today we’re at about three percent.”

More on the subject:

Swiss National Bank ZKB Credit Suisse Monetary Policy Exchange Rate Inflation Mortgage Euro UBS Franc Holidays