Comparison of mortgages in Switzerland: daily variable rate, Saron rate and fixed rate

When it comes to financing the purchase of a property in Switzerland, borrowers can choose between several types of mortgage. Among the most common options are the variable daily-rate mortgage, the Saron mortgage and the fixed-rate mortgage. Each of these mortgages has distinct characteristics in terms of interest rate and financial stability. In this article, we’ll explore the differences between these three types of mortgage in detail, to help borrowers make an informed decision based on their needs and financial situation.

This is a type of mortgage where the interest rate fluctuates daily according to money market conditions. This means that monthly payments can vary throughout the term of the loan, which can lead to higher costs if interest rates rise, but also to savings if rates fall. The higher cost, particularly in view of the lending institution’s margins, is generally a deterrent for borrowers, who use it mainly for reasons of maximum flexibility in specific situations. Many financial institutions do not even offer this option to their customers.

This form of mortgage is based on the Saron rate (Swiss Average Rate Overnight), which is an average interest rate calculated daily from the interest rates charged by banks on interbank lending transactions in Swiss francs. The Saron rate is more stable than the Libor rate (London Interbank Offered Rate) previously used in Switzerland. Monthly payments on a Saron mortgage may vary periodically according to changes in the Saron rate. It is fixed and invoiced for terms of three months, but is often accompanied by a framework contract for terms of 12 to 36 months. This type of mortgage will be chosen by borrowers with short-to-medium-term time constraints and/or who expect key interest rates to fall or stagnate.

This type of mortgage offers borrowers stability and predictability. The interest rate is fixed for a given period (e.g. 2, 5, 10 years) and remains constant throughout that period, regardless of money market fluctuations. This allows borrowers to plan their monthly payments with certainty, but they may pay a higher rate than variable rates if market rates fall. This type of mortgage is the most popular in Switzerland, and is ideally suited to periods of rising rates and/or to borrowers banking on stability and control of their housing costs.

In conclusion, choosing a mortgage in Switzerland is a crucial decision for any borrower. Each type of mortgage – daily variable rate, Saron rate and fixed rate – has its advantages and disadvantages. The daily variable rate mortgage offers flexibility with rates that fluctuate daily, while the Saron rate mortgage offers greater stability with rates based quarterly on a daily average. On the other hand, the fixed-rate mortgage offers security and predictability of payments over a given period.

To make an informed decision, it’s essential that borrowers carefully assess their financial situation, long-term goals and risk tolerance. A financial advisor or mortgage expert can be a great help in this process, providing personalized advice and appropriate recommendations.

Ultimately, whatever mortgage is chosen, it’s essential to fully understand the loan conditions, repayment terms and long-term financial implications. But also, thorough research and professional consultation will enable borrowers to make the best choice for their specific situation, and so realize their dream of home ownership in Switzerland with complete confidence.