Fixed-rate mortgages are getting more expensive every week. In January, Swiss banks offered ten-year fixed-rate mortgages at an average interest rate of 1.26 percent. This week, 2.07 percent were due for this. That’s according to an analysis by online comparison service moneyland.ch for SonntagsBlick. For a mortgage of 800,000 francs, around 16,560 francs per year are due today, a few weeks ago it was 10,080 francs.
So far, so intense. However, the fact that the Swiss banks have not increased interest rates for savers, or not to the same extent, arouses suspicion.
Anyone who gave their bank 10,000 francs for ten years in the form of a medium-term note at the beginning of the year was compensated with an average interest rate of 0.37 percent. According to an analysis by Moneyland, it is currently 0.45 percent. That’s a bit more. However, the increase is not nearly as high as in the case of mortgage interest.
Hardly any interest
The savings account looks even bleaker. The average interest rate there is a measly 0.04 percent – as low as in January. Moneyland evaluated the interest rates of 170 Swiss savings accounts.
Bank officials explain the uneven development by saying that interest rates on savings accounts and mortgages are not determined by the same factors.
“Interest rates on savings accounts depend on short-term interest rates in the money market because such deposits can be withdrawn at any time,” says Maxime Botteron, an economist at Credit Suisse. These short-term interest rates, in turn, are largely determined by the key interest rate of the Swiss National Bank (SNB), which has been negative for more than seven years. “As a result, bank deposits that are not subject to a negative interest rate are de facto subsidized by the banks,” Botteron said.
With regard to mortgage interest rates, Credit Suisse, Raiffeisen, Migros Bank, UBS and ZKB refer to the changed returns on comparable investment products, in particular the rising interest rates on federal bonds, and higher refinancing costs. “The applicable recommendations for customer interest rates for fixed-rate mortgages are not based on the short-term key interest rate of the SNB, but are linked to Raiffeisen’s daily refinancing rates on the capital markets,” said a spokesman for the Raiffeisen Group, number one on the Swiss mortgage market. These capital market interest rates have risen significantly since the beginning of 2022 due to increased inflation expectations.
The bank always wins
Adriel Jost (36), head of the Zurich financial consulting company WPuls, does not contradict the explanations of the banks, but they are only part of the truth: “First and foremost, mortgage loans are not refinanced via the capital markets, but through customer savings.” And since these savings continue to earn little or no interest at all, the profit margins of financial institutions have risen rapidly in recent weeks. Jost is certain: “The banks have seized the opportunity to increase their profits practically overnight – after many have already posted record profits in recent years.”
Jost’s statements are remarkable. After all, WPuls is not a non-governmental organization that is generally critical of the financial center, but an analysis company that is chaired by former UBS chief economist Klaus Wellershoff.
Record profits despite negative interest rates
On January 15, 2015, the Swiss National Bank (SNB) lifted the minimum euro-franc exchange rate of 1.20 – and at the same time set a key interest rate of minus 0.75 percent. Since then, the banks have been whining about falling margins in the important interest differential business.
During the Covid crisis, the industry’s lamentations were heard. When the pandemic broke out, the SNB increased the allowance that exempts banks from negative interest rates. This should give financial institutions more leeway for granting loans.
The increased tax-free allowance is still valid today – and contributed to the fact that the Swiss banks not only survived the crisis unscathed, but were even able to post record profits. The Raiffeisen Group, for example, presented a profit of CHF 1.07 billion in 2021, almost a quarter more than in the previous year. The profit of the cooperative bank thus exceeded the billion mark for the first time. Migros Bank also had reason to celebrate. It increased profits by almost a quarter to CHF 240 million. ZKB, the country’s largest cantonal bank, increased its profit by nine percent to CHF 942 million – a new record. UBS also cashed in well in 2021. With a profit of 7.5 billion dollars, the big bank achieved its best result in 15 years.
Only the crisis-ridden Credit Suisse managed to make a loss. The country’s second-largest bank posted a net loss of CHF 1.6 billion in the past financial year.
On January 15, 2015, the Swiss National Bank (SNB) lifted the minimum euro-franc exchange rate of 1.20 – and at the same time set a key interest rate of minus 0.75 percent. Since then, the banks have been whining about falling margins in the important interest differential business.
During the Covid crisis, the industry’s lamentations were heard. When the pandemic broke out, the SNB increased the allowance that exempts banks from negative interest rates. This should give financial institutions more leeway for granting loans.
The increased tax-free allowance is still valid today – and contributed to the fact that the Swiss banks not only survived the crisis unscathed, but were even able to post record profits. The Raiffeisen Group, for example, presented a profit of CHF 1.07 billion in 2021, almost a quarter more than in the previous year. The profit of the cooperative bank thus exceeded the billion mark for the first time. Migros Bank also had reason to celebrate. It increased profits by almost a quarter to CHF 240 million. ZKB, the country’s largest cantonal bank, increased its profit by nine percent to CHF 942 million – a new record. UBS also cashed in well in 2021. With a profit of 7.5 billion dollars, the big bank achieved its best result in 15 years.
Only the crisis-ridden Credit Suisse managed to make a loss. The country’s second-largest bank posted a net loss of CHF 1.6 billion in the past financial year.
According to Moneyland analyst Felix Oeschger (31), homeowners who do not want to additionally subsidize bank profits only have one option: “Anyone who takes out a new fixed-rate mortgage should definitely compare the conditions of the various providers and obtain several offers.”
Hard negotiations are also important. “It is often possible to get substantial discounts on the published interest rates,” says Oeschger. It is by no means the case that you get the best conditions from the largest providers – quite the opposite.
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