Fixed mortgage rate in Switzerland: definition

Explanation

With a fixed mortgage rate, you enter into a contract with the bank in which the interest rate is guaranteed for a specific term (for example 5, 8 or 10 years). Throughout this entire period, the cost of your debt remains the same: your interest does not change, which gives you strong planning security for your budget. In Switzerland, this type of mortgage is often chosen by homeowners who prioritise stability and are concerned about a future rise in interest rates. The downside is that if market rates fall sharply, you do not benefit from this decrease and early termination can result in substantial penalties.

Practical example

Imagine you finance a home in Switzerland with a mortgage of 700 000 CHF. You choose a fixed rate of 1.80% over 10 years. Each year, you will pay 12 600 CHF in interest (1.80% of 700 000 CHF), which is around 1 050 CHF per month, and this amount will remain the same for the entire duration of the contract. If, after a few years, market rates rise to 3.00%, your interest rate still stays at 1.80%, which protects you against this increase. Conversely, if market rates fall to 1.00%, you continue to pay 1.80% until the end of the contract, unless you accept termination with compensation.