|  Ramzi Chamat

Can mortgage borrowers expect favorable interest rates in 2023 ?

The year 2023 is shaping up to be a crucial period for mortgage borrowers as market interest rates and central bank decisions continue to influence the financial landscape. At the heart of this dynamic is the Swiss National Bank (SNB), which recently announced a key decision regarding its policy rate in September 2023. In this article, we will closely examine the interest rate outlook for mortgage borrowers in September 2023, with a focus on market interest rates, mortgage rates, and the global economic context.




Interest rates are a fundamental component of the global economy, directly impacting the finances of millions of people around the world. In September 2023, the Swiss National Bank (SNB) made a significant decision by maintaining its key interest rate at 1.75%. This decision stemmed from a decline in inflation in Switzerland, which fell below the 2% threshold considered necessary for price stability.


On the international stage, the monetary policy of the U.S. Federal Reserve (Fed) and the European Central Bank (ECB) also plays a crucial role. The Fed chose not to raise its rates in September 2023, while the ECB increased its deposit rate to 4.0%. This situation raises questions about the future decisions of these institutions and their implications for the financial market.



I. Market Interest Rates: Context and Trends


The recent decision of the Swiss National Bank (SNB) to maintain its key interest rate has had significant repercussions on Swiss market interest rates. This decision follows a series of five monetary tightening measures implemented since June 2022, aimed at controlling inflation. Consequently, inflation has seen a notable decline, and it seems unlikely that the key interest rate will increase further in the coming quarters. However, inflation remains a crucial factor that will continue to influence the SNB's future decisions.


When examining long-term interest rates on Swiss bonds, we observe some volatility but also a downward trend in September 2023. Yields on ten-year bonds have mainly remained within a range of 0.9% to 1.1% since last May. Nevertheless, they experienced a slight increase in anticipation of a more stringent monetary policy by the SNB. However, this increase was short-lived, and rates resumed a downward trajectory after the decision to maintain rates. This downward trend is expected to persist in the coming quarters.


It is important to note that these long-term interest rates have significant implications for long-term borrowing, including fixed-rate mortgages. Mortgage borrowers considering long-term loans may benefit from this situation as lower interest rates can potentially lead to lower borrowing costs and more stable long-term financial planning.


However, it is essential to bear in mind that interest rates are influenced by various factors, including global economic developments, the monetary policies of foreign central banks, and fluctuations in financial markets. Therefore, while current trends suggest relatively low long-term interest rates in Switzerland, it is crucial to remain vigilant and closely monitor global economic and financial developments, as they will continue to shape the interest rate landscape in the coming quarters.



II. Mortgage Rates: Current Level and Expected Evolution


Mortgage borrowers are currently on high alert, closely monitoring mortgage rates in the money market. At present, it is expected that new mortgages offered in this market will have rates ranging from 2.4% to 2.8%. This increase represents approximately 170 basis points higher than the period before the initial tightening of the SNB's monetary policy in June 2022.


Considering the absence of expected changes in the SNB's monetary policy in the coming quarters, it is reasonable to anticipate that mortgage rates in the money market will remain relatively stable in the months ahead. However, there is a note of optimism for borrowers seeking longer-term mortgages, as a slightly favorable downward trend can be anticipated in the future.


It is essential to take into account that the mortgage rate market is influenced by various factors, including domestic and international monetary policies, local and global economic conditions, as well as central bank decisions. Therefore, while the current stability in mortgage rates offers some perspective for borrowers, prudent financial management and ongoing attention to market developments remain essential to fully benefit from this favorable situation.





In conclusion, the Swiss National Bank (SNB) maintained its key interest rate at 1.75% in September 2023, reflecting a decrease in inflation in Switzerland and signaling the likely end of short-term rate hikes. The monetary policies of the Federal Reserve (Fed) and the European Central Bank (ECB) continue to influence global interest rates, while long-term rates in Switzerland are expected to remain stable, or even slightly decrease.


For mortgage borrowers, this means that mortgage rates in the money market are likely to remain stable, while long-term mortgages may become more advantageous. However, it is essential to monitor the evolution of inflation and the future decisions of central banks, as they will continue to influence the financial landscape in 2023 and beyond.


Source: UBS

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