The Swiss National Bank (SNB) has made the decision to lower its key interest rate to 1.25 percent, marking the second consecutive rate cut. This move, according to economists, is influenced by a number of factors including controlled inflation, moderate economic growth in Switzerland and an anticipated rise in unemployment. Additionally, the recent strengthening of the franc may have played a role in the SNB’s decision.
The implications of this interest rate decision are far-reaching and extend to various sectors including real estate, investments and savings. Experts predict that fixed-rate mortgage interest rates may not see a significant decline as a result of the rate cut, as the market had already priced in a reduction to 1 percent. Fixed-rate mortgages provide stability and predictability for homeowners in the face of fluctuating interest rates.
On the other hand, the reduction in SNB base rate also affects SARON overnight rate which makes money market mortgages more attractive compared to fixed-rate mortgages. However, experts advise caution as the interest rate difference between these two types of mortgages remains small. The impact of SNB’s decision on reference interest rates crucial for rent development in Switzerland may be limited for now but it could have an effect on them soon.
Banks are expected to adjust interest rates on savings accounts following SNB’s rate cut with most likely reducing rates in response. This decision is also likely to have an impact on real estate market with increased demand and reduced likelihood of price correction being some possible outcomes. Overall, SNB’s interest rate decision has wide-reaching implications for various financial sectors and individuals in Switzerland
