What is the SNB and what does it do?

The SNB (Swiss National Bank) is Switzerland’s central bank. It began operations in 1907 and operates within a specific federal legal framework, with two headquarters (Bern and Zurich).

Its mandate is to ensure price stability while taking cyclical developments into account; to deliver on this mandate, the SNB relies on a monetary-policy strategy, one cornerstone of which is its operational definition of price stability (inflation between 0% and 2% over the medium term).

In practical terms, the SNB influences the cost of money and monetary conditions in Switzerland via (among other things):

• the policy rate and the remuneration of sight deposits,
• management of liquidity,
• its ability to intervene on the foreign-exchange market “if necessary”,
• and, in the area of financial stability.

For you, as a mortgage borrower (or future homeowner), the Swiss National Bank matters because it influences, directly or indirectly, the mortgage rates, SARON, financing conditions, the real-estate market, and more broadly the economic environment (inflation, Swiss franc, financial markets, etc.).

Policy rate and zero rates

What the SNB (Swiss National Bank) policy rate is

The policy rate of the SNB is the main monetary-policy signal: it serves as an anchor for short-term CHF money-market rates. At each quarterly assessment (March, June, September, December), the Swiss National Bank makes a decision and also publishes a conditional medium-term inflation forecast.

In the recent context, official communications indicate a policy rate of 0.00% since June 2025, which corresponds to an environment described as zero rates.

See below the recent history of the SNB policy rate

Why do we talk about “zero rates” (and what it implies)

A zero-rate environment means that the marginal cost of CHF money (the additional cost to obtain CHF 1 of additional funding), at the policy-rate level, is extremely low. This generally aims to:

• avoid inflation that is too low (or even deflation),
• ease financial conditions (cheaper credit),
• limit the appreciation of the Swiss franc in certain contexts.

Example “mortgage and budget”

If you have a short-term indexed mortgage (e.g. at the SARON rate + margin), a policy rate at 0% tends to pull SARON down, which can reduce your interest… provided that the bank margin and rate-floor mechanisms (often called a “floor”) do not neutralise the decrease.

A common case is a contract stating SARON minimum = 0%. This means that, even if SARON becomes slightly negative, the SARON component billed remains at zero, and only the margin continues to apply.

SNB influence on mortgage rates

Why mortgage rates don’t all move the same way

Mortgage rates are not a simple “copy-paste” of the policy rate of the SNB. They depend in particular on:

• the segment (fixed-rate mortgage vs SARON mortgage),
• market expectations (yield curve, CHF swaps),
• hedging costs, credit risk, and competition between banks and insurers.

In practice:

• the policy rate and money-market rates mainly influence SARON mortgages (variable/adjustable),
• fixed-rate mortgages react more to market yields (bonds, swaps) and expectations.

Typical transmission to the SARON mortgage

The SNB seeks to keep secured money-market rates close to its policy rate. In this context, SARON tends to move close to the policy rate after a decision, which explains its popularity as a basis for variable-rate mortgages.

Example “10-year fixed vs SARON”

Let’s imagine two households buying a similar property:

• Household A: 10-year fixed-rate mortgage, locks in a known rate, but may “pay dearly” if rates fall afterwards.
• Household B: SARON mortgage, benefits more quickly from monetary easing, but is exposed to a future increase.

This choice is not only a matter of “betting on rates”; it is a matter of budget risk tolerance, ability to absorb shocks, and holding horizon.

SNB impact on the SARON rate

Definition and role

SARON (Swiss Average Rate Overnight) is an overnight CHF reference rate, based on the repo market. It is administered and calculated by SIX, while the SNB often publishes an indicative level for information purposes.

How this translates into a SARON mortgage

A SARON mortgage typically works as follows:

• SARON is observed/calculated over a period (often quarterly),
• the bank applies a calculation mechanism (compounded average) and adds a margin,
• the total billed rate is therefore: SARON (calculated) + bank margin (+ possible floor).

A simple concrete example

If SARON is close to 0% (a zero-rate environment) and the bank margin is 0.8%, the billed rate is around 0.8% (depending on the exact terms of the contract). If SARON rises toward 1%, the billed rate moves toward 1.8% with the same margin, and your interest increases.

Financing conditions

How the SNB influences “your” financing conditions

Your bank sets your terms (rate, margin, requirements, amortisation), but the SNB strongly influences the environment:

• refinancing cost,
• risk appetite,
• liquidity and competition conditions,
• and prudential requirements that can make credit more expensive.

The macroprudential role: countercyclical buffer and real estate

When risks rise in the mortgage and real-estate market, the Swiss National Bank can propose activating or adjusting the countercyclical capital buffer. This can require banks to tie up more capital for certain mortgages, which can translate into higher margins or stricter criteria.

Example: an indirect but real effect

You have a “borderline” file (tight income, minimal down payment, high expenses/income ratio). In a phase where real-estate risks are judged to be rising, banks may be stricter, even if the policy rate falls. A rate cut does not, by itself, erase prudential logic. With a good mortgage broker, you can put together a “solid” file, obtain your mortgage loan and picture yourself totally relaxed in your future garden.

The SNB and Real Estate

Why the SNB is interested in real estate

Real estate is central in Switzerland: it represents a significant share of households’ wealth, and mortgages weigh heavily on banks’ balance sheets. The SNB therefore monitors imbalances (overvaluation, credit growth, vulnerabilities) because they can affect financial stability.

Effect of rates on prices and demand

Simplifying:

• rate cuts → lower interest payments at a given budget → higher borrowing capacity → possible upward pressure on prices,
• rate hikes → the opposite effect (with inertia linked to supply, demographics, and local constraints).

Example: buying in a low-rate period

When rates are low, the classic risk is to “over-buy” (maximise capacity), then suffer a rate shock during normalisation. A prudent approach is to simulate:

• a scenario of SARON rising,
• higher costs (maintenance, co-ownership fees),
• and a decline in value in the event of a correction.

Financial stability

The SNB’s role in financial stability

In addition to monetary policy, the SNB has a mission to contribute to the stability of the financial system. It analyses risks, participates in macroprudential measures, and can support the system in times of liquidity stress.

Lender of last resort: what it means

In extreme situations, a central bank may have to provide liquidity to prevent the system from coming to a halt. This role is often summarised by the expression lender of last resort, and it aims to prevent a liquidity shock from turning into a systemic crisis.

Example: impact on your plans

If the banking system seizes up:

• banks lend less,
• financing conditions tighten,
• margins increase,
• and your plans (purchase, renewal, rate) may be affected.

Inflation and the SNB

Price stability: the core mission

The SNB defines price stability as inflation between 0% and 2% over the medium term. This definition guides the calibration of the policy rate and monetary conditions.

Why inflation matters for your mortgage

Inflation influences decisions by the Swiss National Bank, nominal rates (policy rate, bonds, swaps) and, indirectly, your budget through the cost of living. When inflation is too low, the SNB may ease. When it is too high, it may tighten.

Concrete example: low inflation and costs that “still go up”

Even if interest falls, other costs can rise:

• co-ownership fees,
• energy,
• works,
• insurance.

Savings and investments

SNB impact on your savings

A zero-rate environment tends to reduce returns on classic bank savings. Decisions by the SNB also influence deposit remuneration and, more generally, the relative attractiveness of bonds and equities.

Effect on real-estate financing via capital allocation

When “risk-free” investments yield little, some investors turn to other assets (including real estate). This can support demand and influence prices, with indirect effects on financing conditions and competition among lenders.

Example: “amortise or invest” trade-off

In a low-rate context, some households hesitate between:

• amortising (reducing debt and risk),
• or investing (hoping for a return higher than the cost of debt).
  The answer depends on your risk profile, your taxation, and your effective rate level (including the margin).

Swiss franc (CHF): exchange rate, strong franc

Why the franc is a central topic for the SNB

The Swiss franc is often considered a “safe-haven” currency. A strong franc can make exports more expensive and reduce the price of imports, which weighs on inflation. In certain contexts, the SNB may judge it necessary to act to maintain monetary conditions compatible with its mandate.

Concrete example: strong franc and mortgages

The link is not direct, but rather via the macroeconomic channel:

• strong franc → lower imported inflation → more accommodative monetary policy → lower rates for longer → SARON and sometimes fixed-rate mortgages potentially lower (depending on markets).

Swiss financial markets

Link between the SNB, the money market and the bond market

The SNB operates at the heart of the money market (liquidity, repos, sight deposits) and influences overall financing conditions. Bond and financial markets then incorporate expectations about inflation, growth and future decisions.

Why this concerns you

Even if you do not invest actively, fixed-rate mortgages rely on market references, banks manage their balance sheet and hedges, and market liquidity transmits to the terms offered to the end client (you, the buyer-borrower).

Concrete example: market expectations

It is common for fixed rates to move before an official decision, because the market is already anticipating a hike or a cut. This can give the impression that your bank “changes its rates” while the SNB has not yet communicated.

Liquidity in the banking system

What liquidity is for

Liquidity is banks’ ability to meet their payments and fund themselves day to day. The SNB steers liquidity through operational tools, to prevent a liquidity problem from turning into a crisis of confidence.

Sight deposits and incentive mechanisms

The remuneration system for sight deposits (based on thresholds) makes it possible to adjust incentives and banks’ behaviour, alongside market operations. It is an important element for anchoring short rates close to the policy rate.

Example: how liquidity stress affects credit

If liquidity becomes scarce:

• banks refinance at a higher cost,
• increase their margins or tighten criteria,
• and credit (including mortgages) can become more expensive, even if the policy rate does not move.

For reference, the official website of the Swiss National Bank is: https://www.snb.ch/en/