Mortgages under pressure: Why fixed-rate mortgages are hardly getting cheaper

The interest rates for ten-year fixed-rate mortgages are currently 1.86 percent – 0.07 percentage points less than at the beginning of the year.
Comparis expert Dirk Renkert does not expect interest rates to fall this year.
He cites the high national debt as the main reason – the USA alone is approaching $40 trillion.

Banks have slightly reduced interest rates on fixed-rate mortgages. The publicly published reference interest rates from over 30 credit institutions for ten-year mortgages averaged 1.86 percent on June 8th, according to the comparison service Comparis. That is 0.07 percentage points less than at the beginning of the year.

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But it’s unlikely to get any cheaper. Comparis financial expert Dirk Renkert says: “Anyone who has to extend a mortgage in the next few months should not speculate on significantly lower interest rates. “In the current situation, there is much to suggest that the upward pressure on fixed-rate mortgages will continue in the coming months.” According to the expert, interest rates are likely to move sideways or even rise slightly.

States are piling up mountains of debt

Renkert cites, among other things, the high level of debt in many countries as a reason. The USA is particularly in focus. The American national debt is approaching $40 trillion. Many EU countries are also accumulating mountains of debt.

This development is changing the perception of the financial markets. Investors are again demanding higher risk premiums for long-term government bonds, which is causing yields to rise. “For many years, states were able to expand their debt practically unlimitedly without this having a major impact on financing costs. We are now observing a trend reversal. The markets are starting to price in long-term risks again.”

Mortgage interest rates only fall during a global recession

In addition to national debt, the geopolitical situation represents the greatest uncertainty factor for the coming months. The tensions in the Middle East in particular are being followed closely by the financial markets. If the situation were to worsen significantly and the global economy fell into recession, a significant decline in fixed-rate mortgages would also be likely.

Renkert expects the National Bank to stick with its zero interest rate policy. Despite the numerous uncertainties, the Swiss economy presents itself as one of the most resilient in Europe. “The labor market is robust, unemployment remains low and consumer sentiment has recently stabilized.”

A central reason for the comparatively stable situation in Switzerland is this continuously moderate inflation. Despite energy prices being significantly higher at times as a result of the Iran war, inflation of 0.6 percent remains within the National Bank’s target range of 0 to 2 percent. For comparison: Inflation in the EU is currently 3.2 percent.

Tips from Comparis for mortgage borrowers

Take advantage of market weakness: It’s worth monitoring the mortgage market and taking advantage of favorable times to take out a deal.
Choose the appropriate risk strategy: Lower mortgage interest rates should not be the sole decision-making criterion. Those who can hardly cope with rising interest rates are better off with fixed-rate mortgages, while borrowers who are more financially flexible can also choose Saron mortgages.
Please note important deadlines when planning: When renewing a fixed-rate mortgage, notice periods of up to 6 months should be observed and planning should be started early. The documents should also be prepared in good time and enough lead time should be planned.
Consider affordability in old age: The income situation in old age is crucial, as affordability can decrease with low income. Therefore, it should be checked early on whether partial amortization makes sense.
Don’t accept the first offer: The interest rate offered by the house bank is negotiable. There is usually a large gap between the interest rates that the mortgage institutes publish as benchmark rates and the best negotiated interest rates.