Brexit pushes Swiss mortgage rates to new lows

Swiss home owners may have reason to be cheerful following the Brexit and lower mortgage rates Keystone

As spooked investors take refuge in the king of currencies, the Swiss franc, several Swiss banks and insurance companies have lowered their basic mortgage rates following Britain's vote to leave the European Union. Long and medium-term rates are at record lows.

Swiss home owners or future buyers have received some good post-Brexit news. Following Britain’s referendum on Friday in favour of exiting the EU, average mortgage rates have fallen to their lowest levels ever, the financial advisory platform Moneypark said in an online statement on Tuesday.

The ten-year fixed mortgage rate of 1.53% in mid-June now stands at an average 1.46%. The seven-year fixed rate has fallen to 1.23% and the 15-year rate to 1.77%. Short and medium-term rates have hardly moved, however. The two-year fixed rate remains at 1.1% and the five-year rate at 1.14%.

Due to economic uncertainty there has been a steady downward trend since the start of the year and the Brexit simply “reinforces” this phase of low lending rates, says Moneypark.

The mortgage specialist believes the Swiss National Bank (SNB) may lower its negative interest rates even further to prop up the nation’s rate-sensitive exports. In mid-June, the central bank opted to stick with the current spectrum of interest rates between -1.25% and -0.25%. The SNB charges domestic banks a negative interest rate of -0.75% to deposit their reserves at the SNB.

On Friday, foreign exchange markets opened amidst great volatility following the Brexit. The franc, which had been trading in a band of CHF1.08 to CHF1.11 against the euro, plunged to CHF1.06 before stabilising. It now stands at CHF1.08.

In a rare move for a major central bank, the SNB openly intervened in currency markets to weaken the safe-haven franc, promising to do even more if needed. On Monday, the SNB posted the first data on how it is intervening to contain the post-Brexit fallout on the franc.

Sight deposits – assets parked at the central bank by domestic banks – have accumulated to the point that they have broken the CHF500 billion ($513 billion) mark for the first time. Analysts predict further SNB interventions to weaken the franc.