SARON mortgages: margins eat up SNB cut
SARON mortgages, so-called money market mortgages, are based on the central banks’ key interest rate. The effective interest rate is calculated from the base rate + the banks’ margin. Despite the base rate of 0%, the best offers for SARON mortgages are currently around 0.75% (source: Hypotheke.ch), which equates to an equally high margin. Twelve months ago, this margin was still at 0.45% This clearly shows that banks have widened their margins and that the SNB’s monetary easing is not being felt by customers.
Fixed-rate mortgages: slightly weaker development
The trend in fixed-rate mortgages is somewhat less clear. Here too, margins have risen. At the end of June, the most favourable offers for a ten-year fixed-rate mortgage were still at 1.3 percent. It is now 1.38 per cent – an increase of 0.08 percentage points. (Source cash.ch)
Actually, the opposite would have been expected: The yield on ten-year federal bonds, which is decisive for fixed-rate mortgages, has fallen from 0.41 to 0.24 per cent in the same period. Swap rates, the second important reference value, have also fallen and are around 0.1 percent below the level of 21 June 2025, when the SNB last lowered the key interest rate to 0.0 percent.
Banks protect margins – less competition exacerbates the situation
Mortgage conditions not only reflect market developments, but also the banks’ earnings strategy. Due to the SNB’s zero interest rate, short-term interest income is collapsing, which is why the institutions are trying to secure their profit margins with higher premiums on mortgages. The fact that this is succeeding is also due to the market situation. With the disappearance of Credit Suisse, there is no longer a major provider, and many pension funds and insurance companies have largely withdrawn from the mortgage business due to a lack of distribution channels. The reduced competition allows banks to easily pass on higher margins. This effect is exacerbated by regulatory pressure under Basel III, which, among other things, imposes higher capital requirements and thus also contributes to higher prices.
Outlook: No easing in sight
For borrowers, this means that hopes of noticeably lower mortgage rates have not yet been realised – neither for SARON nor for fixed-rate mortgages. Margins are likely to remain high in the short term as long as competition in the market is limited. In the longer term, the development of fixed-rate mortgages depends heavily on the international capital markets and inflation expectations, which currently remain volatile.
