Interest on mortgages is one of the most important cost factors for any real estate financing. Given the current period, its continuous fluctuations can certainly have a major impact on total annual costs. In a recent assessment, the Swiss National Bank (SNB) raised the benchmark interest rate by 0.75 percentage point to 0.5 percent because of rising inflationary pressures and the resulting effects. Inflation in Switzerland to date has risen above 3 percent. Further retrenchments are expected in the coming months, resulting in higher costs for those who have invested in real estate, relying on long-term mortgages. As is easily desirable, interest rates are in flux and are subject to constant fluctuations. Daily updates or corrections to forecasts and new announcements from national banks are published. The actual time is certainly good to set up an interest rate warning to better assess the current situation and thus take specific steps to protect a mortgage.
Referring to the latter, it might help to take out a fixed-rate mortgage in advance, better known as a term mortgage. This factor can guarantee the current interest rate. For this additional security, a so-called "forward surcharge" is often added to the costs. In a nutshell, the forward mortgage can be viewed as a fixed mortgage that has an interest rate insurance policy. Often the interest rate can be covered up to 12 months in advance, but sometimes as much as 18 or even 24 months, depending on the current situation and the type of investor. Evaluating the affordability of this type of mortgage is certainly very complicated, given the constant fluctuations in rates: the best scenario takes place when the interest rate of a fixed mortgage increases, before the start of the term mortgage, so that it is higher than the rate with the added insurance surcharge. A term mortgage can be convenient even if rates remain the same or even if they fall slightly: those who apply for a mortgage and do not want surprises prefer to know the interest rate from the beginning. Because of rising interest rates, those who own real estate are looking early for possible solutions to take maximum advantage of still favorable interest rates. A mortgage of this type, which is based on changes in the money market, does not seem convenient. However, recent studies, carried out over the long term, have shown that, in the past, considered mortgages have proven to be more cost-effective than fixed mortgages.
The strategies just outlined summarize several specific cases that can be addressed, but the support of professional advice is widely recommended. The solution should be created specifically ad hoc and should reflect one's situation, in terms of personal and economic security.
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