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Press release: The crisis is accelerating the postponement of long maturities

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Press release

Comparis Mortgage Barometer for the first quarter of 2022

The crisis is accelerating the transfer to long maturities

On the Swiss mortgage market, the attraction for long maturities is confirmed. This is according to the latest edition of the Comparis Mortgage Barometer. “Right now, many property owners are worried about inflation and how the war in Ukraine might affect US and European central bank decisions. By switching to fixed rate mortgages, they protect themselves from turbulence in the capital markets. In turbulent times, long-term mortgages offer planning security,” says Leo Hug, Money Expert at Comparis.

Zurich, March 31, 2022 – Since the beginning of the year, the indicative rates for fixed mortgages with long maturities have risen considerably. This is shown by data from HypoPlus, the mortgage specialist service of the Comparis Group. “Right now, many property owners are worried about inflation and how the war in Ukraine might affect US and European central bank decisions. By switching to fixed rate mortgages, they protect themselves from turbulence in the capital markets. In turbulent times, long-term mortgages offer planning security,” observes Leo Hug, Money Expert at Comparis. He says he is struck by the demand for mortgages on

15 years, at a level not seen in recent years. According to him, new mortgage offers without prepayment indemnity clauses could also contribute to firming up demand.

The indicative rates presented here are the average rates published by some 50 mortgage institutions before negotiation. The rates obtained by HypoPlus are significantly lower: the best negotiated rate for a ten-year fixed mortgage is 1.27%, while the indicative rate is 1.71%.

Central banks face a dilemma

According to the Comparis expert, the persistent rise in commodity prices is leading to an accentuation of the inflationary outlook. On the mortgage market, this situation is fueling the rise in rates, especially for long maturities. “The US Federal Reserve (Fed) and the European Central Bank (ECB) should therefore fight inflation by raising interest rates. And economic growth could stall because of the war in Ukraine,” warns L. Hug. Raising interest rates too quickly could cripple economic growth. According to L. Hug, central banks are once again on a tightrope, trying to find the right balance between hasty intervention and delayed action. In the worst case, this balancing act could fuel inflation in a context where demand is at half mast (stagflation).

The need for security works against Saron mortgages

“Due to the tightness of central banks’ room for maneuver, it is unlikely that Saron mortgages will rise significantly at this time. But it is clear that in the current political and economic environment, this product is losing popularity”, analyzes L. Hug. According to data from HypoPlus, mortgage takers are increasingly prioritizing the fiscal security of long-term mortgages to avoid exposure to increased volatility in interest rate markets.

Higher rate difference compared to the swap market

This development concludes a cycle of several years of low rates for fixed mortgages: by mid-May 2019, the banks’ ten-year refinancing rates – the so-called swap rates – had fallen to settle permanently in negative territory. Until mid-August 2019, they remained at their all-time low of -0.69%. Since then, they had been on an upward trend and reached 1.71% on March 21, 2022.

This turnaround took place against a backdrop of increased competition in the mortgage market. The margin between banks’ ten-year refinance rates and mortgage rates was still 1.19 percentage points in mid-May 2019. Now, after a return to higher yields, the margin realized by banks on ten-year fixed rate mortgages contracted to 0.97 percentage points.

“Competition between mortgage institutions has intensified over the past three years. This situation is based in particular on two factors: on the one hand, online comparators have increased the level of transparency, and on the other hand, the growing role of investment foundations, pension funds and insurance companies in the mortgage market has increased the pressure on mortgage banks”, explains L. Hug. Despite everything, the difference between the indicative rate and the best rate negotiated by HypoPlus remains 0.44 percentage point, which, for the expert, testifies to the room for maneuver that mortgage takers retain.

Negotiating the mortgage rate offers considerable savings potential

Professional mortgage brokers methodically compare and effectively negotiate loan terms from mortgage institutions. Comparis compared the average spreads between the indicative rate and the best rate obtained by HypoPlus for 15, 10, 5 and 2 year mortgages in the fourth quarter and calculated the savings potential over the life of the mortgage – which turns out to be considerable.

Database

HypoPlus, the mortgage specialist service of the Comparis Group, provides the interest rates from the Comparis Mortgage Barometer. These data are based on the indicative rates of approximately 50 lending institutions. They are updated daily and published in therate overview. Experience shows that in most cases the rates given in mortgage offers are lower than the official indicative rates. The next Mortgage Barometer will be published in early July 2022.

For more information :

Leo Hug
 Expert Argent
 Téléphone : 079 687 83 93 

Email: media@comparis.ch comparis.ch/HypoPlus

About comparis.ch

With more than 80 million visits per year, comparis.ch is one of the most visited websites in Switzerland. The company compares the rates and services of health insurance companies, insurance companies, banks and telecommunications operators. It also presents the largest online offer in Switzerland for automobiles and real estate. With its detailed comparisons and in-depth analyses, it contributes to more transparency in the market. comparis.ch thus strengthens consumer expertise in decision-making. Founded in 1996 by economist Richard Eisler, the company now has around 175 employees in Zurich.

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