Swiss face rent hikes with first mortgage gauge jump in 15 years

Apartments in Zurich: already pricy, potentially about to be pricier. © Keystone / Christian Beutler

Switzerland’s national benchmark for mortgage costs has risen for the first time in its history, setting up thousands of tenants on the country’s high-price housing market for rent increases.

After years of decline, the reference interest rate for rents ticked from 1.25% to 1.5%, the Federal Office of Housing said on Thursday. Under Swiss law, a benchmark increase by a quarter percentage-point allows landlords to raise rents by 3%.

+ Switzerland: a wealthy land of tenants

The increase – valid from Friday – is driven by the Swiss National Bank’s increase of borrowing costs to fight inflation. Even so, economists have warned that the subsequent wave of rent hikes might itself fan consumer-price growth.

The quarterly-calculated benchmark was introduced in 2008 and is based on the average interest rate of domestic mortgages in Swiss francs. Economists predict a further increase on at least one of the next two publication dates on September 1 and December 1.

While rents are set to rise, prices on Switzerland’s real estate market show signs of weakening.