How can you benefit from the drop in mortgage rates?

• Seize the opportunity with a fixed-rate mortgage
• Take advantage of low rates with a variable-rate mortgage
• If mortgage rates drop, consider refinancing
• Increase your purchasing power
• Leverage low rates to invest in rental properties
• Diversify your mortgage options
• Monitor interest rate trends and act accordingly
• Make the most of a favorable market

In Switzerland, the recent drop in mortgage rates has created many opportunities for prospective homebuyers. If you’ve been considering purchasing a property, improving your current home, or even refinancing an existing mortgage, now might be the perfect time to act. Lower mortgage rates mean reduced borrowing costs, opening new financial possibilities for a wide range of buyers.

Seize the opportunity with a fixed-rate mortgage

When mortgage rates are falling, one of the most important decisions to make when securing a loan is whether to choose a fixed-rate or variable-rate mortgage. In today’s market, fixed-rate mortgages offer an attractive opportunity to lock in historically low rates. Fixed-rate mortgages provide predictable monthly payments over the entire term of the loan, usually 10 to 15 years, although shorter fixed terms (like 5 years) are also possible.

In a declining interest rate environment, a fixed-rate mortgage can serve as a form of protection against future rate increases. Since interest rates may fluctuate due to global economic conditions, locking in today’s rate for the long term ensures that your borrowing costs remain stable. This offers peace of mind, especially for buyers planning to stay in their new home for many years.

Why act now? Falling mortgage rates may not last, and interest rates could rise again as central banks adjust their monetary policies in response to inflation and economic growth. By locking in a low rate today, you shield yourself from the risk of future increases that could significantly affect your monthly payments.

When choosing a fixed-rate mortgage, it’s important to evaluate the term that best fits your plans. If you intend to stay in your home for a decade or more, a 10- or 15-year fixed-rate loan may be ideal. On the other hand, if you’re unsure about your long-term plans, a shorter fixed term, such as five years, could offer greater flexibility.

Take advantage of low rates with a variable-rate mortgage

Mortgage rate drop: while fixed-rate mortgages offer some stability, variable-rate options allow for short-term savings. In Switzerland, many variable-rate mortgages are linked to the SARON (Swiss Average Rate Overnight), which is currently at historically low levels due to the Swiss National Bank’s monetary policy. A SARON-based mortgage usually starts with a lower interest rate than fixed-rate loans, meaning lower monthly payments in the short term.

When mortgage rates are falling, for some buyers this flexibility can be a smart way to manage upfront costs. If you plan to sell your property or refinance in a few years, a variable-rate mortgage may be a more cost-effective option. However, it’s essential to understand the risks involved. If the SARON rate increases, your mortgage payments will also rise. Buyers choosing this option should therefore have the financial flexibility to handle potential increases.

If you’re willing to take risks during a mortgage rate drop and believe that interest rates will remain low for a few more years, consider a variable-rate mortgage. Closely monitor market conditions and be ready to switch to a fixed-rate mortgage if you sense rates are starting to rise.

If mortgage rates drop, consider refinancing

If you already own a home and are paying a mortgage with a higher interest rate, take advantage of the drop in mortgage rates. Refinancing could help you benefit from the current low rates. Refinancing involves replacing your current mortgage with a new loan at a lower interest rate, reducing your monthly payments or shortening your loan term without increasing costs. Over time, this can result in significant savings.

However, refinancing is not free. There are costs such as notary fees, administrative charges, and possible early repayment penalties. You need to carefully calculate whether these upfront costs will be offset by the savings you’ll make from a lower rate.

Refinancing during a mortgage rate drop can also help you adjust your financial situation. For example, if you originally took out a 10-year mortgage but now wish to reduce your payments or extend the term to lower your monthly costs, refinancing can help. Conversely, if your financial situation has improved, you could consider refinancing to a shorter term, allowing you to pay off your mortgage faster while saving on long-term interest.

Work closely with your lender or financial advisor to calculate the break-even point for refinancing. If you seize this opportunity during a mortgage rate drop, this is the point at which the savings from the lower interest rate outweigh the refinancing costs.

Increase your purchasing power

One of the most appealing benefits of falling mortgage rates is the increase in purchasing power. Lower rates reduce your monthly payments, meaning you can afford a larger loan without significantly increasing your monthly expenses. This can make a big difference in the type of property you can afford—whether it’s a larger home, a place in a more desirable location, or a newer building with fewer maintenance issues.

While it may be tempting to stretch your budget when mortgage rates are low and borrowing costs are down, it’s important to stay within your financial comfort zone. You should plan for future expenses such as home maintenance, property taxes, and other homeownership-related costs.

Use mortgage calculators to determine what you can reasonably afford. If mortgage rates drop and you’re able to take out a larger loan, make sure you have enough flexibility to meet your other financial obligations.

Take advantage of low rates to invest in rental properties

If you’ve been thinking about investing in Swiss real estate, the drop in mortgage rates is the perfect opportunity to finance rental properties or second homes. Lower borrowing costs mean your return on investment (ROI) can be significantly higher—especially in high-demand rental markets.

When investing in real estate and mortgage rates drop, it’s important to assess both short- and long-term returns. In the short term, you’ll benefit from lower mortgage repayments, making it easier to generate positive cash flow through rental income. In the long term, property typically appreciates in value, which can lead to capital gains when you sell the property.

For investment properties, choosing between a fixed-rate and a variable-rate mortgage depends on your investment strategy. If you plan to keep the property for many years, a fixed-rate mortgage offers stability and predictable expenses. On the other hand, if you’re aiming for a short-term investment, a variable-rate mortgage can provide greater flexibility and allow you to save money in the short term.

When you want to take advantage of a drop in mortgage rates, consult a real estate investment advisor to analyze market trends and assess which types of properties are likely to offer the best returns based on your financial goals and risk tolerance.

Diversify your mortgage options

While traditional fixed- and variable-rate mortgages are the most common, there are other mortgage products worth considering. For example, a combined mortgage merges elements of fixed and variable rates, allowing you to benefit from short-term rate reductions while maintaining long-term stability.

Other options, such as second-rank loans or bridge loans, can be useful for buyers needing greater flexibility—such as those buying a new home while waiting to sell their current one. Diversifying your financing options can help balance risk and return, while giving you more control over your mortgage strategy.

Don’t settle for the first mortgage product you come across. In a period of falling mortgage rates, it’s worth taking the time to explore. Speak with a mortgage broker or financial advisor to explore all available options and find a solution tailored to your specific needs.

Monitor interest rate trends and act accordingly

If a mortgage rate drop has occurred today, interest rates may not stay low forever. Interest rates are influenced by various global economic factors, including inflation, central bank policies, and geopolitical events. For example, when the global economy stabilizes following crises and other challenges, rates may begin to rise again.

By staying informed about rate trends and economic forecasts, you can better plan your mortgage decisions. If you’re considering buying or refinancing a home, it’s wise to act as early as possible to take advantage of current low rates before they rise.

When mortgage rates drop, set up notifications with your bank or mortgage broker to receive updates on rate changes. Being prepared and acting quickly can help you secure favorable terms before the market shifts.

Make the most of a favorable market

The drop in Swiss mortgage rates has opened a world of opportunities for homebuyers and real estate investors. Whether you’re looking to buy your first home, upgrade to a larger property, refinance an existing loan, or explore real estate investments, now is the time to act strategically.

By carefully evaluating your options—whether it’s choosing between fixed- or variable-rate mortgages, exploring refinancing or investment possibilities—you can fully take advantage of today’s mortgage rate drop, a unique market opportunity. Remember, rates won’t stay low forever. So it’s essential to stay informed, seek expert advice, and make decisions at the right time to maximize your financial gains.