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Between March 2024 and June 2025, the Swiss National Bank (SNB) gradually lowered its policy interest rate from 1.75% to 0%. At its last quarterly meeting in 2025, it decided to keep the rate unchanged at 0%.


What are the SNB’s economic motivations?

Persistently low inflation

Inflation in Switzerland remains very moderate and has not shown any significant increase. Current forecasts estimate inflation at around 0.3%, a level that is expected to remain stable. In recent months, inflation has even been lower than anticipated. In this context, an increase in interest rates is not justified from the perspective of price stability.


Interest rates are used as a tool to regulate the economy: when they rise, borrowing becomes more expensive, which reduces consumption and investment. Lower demand then contributes to price stabilization and slows inflation. In the current situation, where demand does not exert upward pressure on prices, there is therefore no need to raise interest rates, which can remain at a low level.


Support for economic activity and exports

The Swiss franc remains structurally strong due to its status as a safe-haven currency. This appreciation makes Swiss goods and services more expensive abroad, reducing the competitiveness of Swiss companies in international markets. This effect is reinforced by a slowdown in the global economy, which limits external demand.


Faced with these constraints, the SNB is maintaining a low policy rate in order to support economic activity in Switzerland. Low interest rates reduce borrowing costs, facilitate corporate investment financing, and encourage household consumption. By lowering the cost of borrowing, monetary policy thus aims to offset the negative effects of a strong franc and stabilize economic growth.


Implications for people seeking to purchase property

Rising demand

The reduction in the policy rate creates favorable financing conditions for the real estate market, as it feeds through to mortgage rates offered by banks. When the policy rate declines, banks can refinance themselves at lower cost and grant loans at lower interest rates, reducing monthly payments and the total cost of borrowing. Mortgage loans therefore become more accessible for households wishing to acquire a property.


At the same time, low interest rates limit returns on traditional savings products such as savings accounts or low-risk investments. In this environment, real estate appears as a relatively safe and durable investment, offering protection against the erosion of wealth. This combination stimulates housing demand.


Risk of rising prices

When demand grows faster than supply—particularly in a context of limited construction—competition among buyers intensifies. With a limited number of properties available, multiple buyers compete for the same assets, putting upward pressure on prices, especially in already tight markets.


Direct support for Swiss households

For households wishing to purchase a home or invest in rental property, low interest rates ease access to financing and reduce the total cost of borrowing. This makes home ownership more affordable, including in highly urbanized and strongly sought-after regions such as Zurich, Geneva, or Lausanne.


Implications for property owners

Potentially lower mortgage costs

A low policy rate enables banks to offer mortgages on more favorable terms, reducing the cost of real estate financing for property owners.


Differentiated impact on variable and fixed rates

The reduction in the policy rate is quickly reflected in short-term mortgage rates. Households with variable-rate mortgages therefore benefit almost immediately from lower monthly payments.


For borrowers who have opted for fixed-rate mortgages, this situation creates strategic opportunities, particularly when renewing contracts or renegotiating terms, in order to secure more favorable conditions. According to economists, since the market has already priced in the zero-interest-rate environment, no significant short-term rate changes are expected, which may make variable-rate mortgages particularly attractive.


By contrast, long-term fixed rates adjust more slowly, as they already incorporate market expectations. Nevertheless, the overall low-interest-rate environment enhances the general attractiveness of mortgage financing and supports demand in the real estate market.


Increase in property values

The reduction of the policy rate to 0% has been accompanied by rising demand for owner-occupied housing and increasing prices in the most sought-after regions. For current property owners, this translates into an increase in the “paper value” of their assets and higher potential gains in the event of resale. Conversely, entry barriers rise for future buyers, particularly in cities and urban agglomerations where housing supply is limited.


Risks to consider

Maintaining very favorable financing conditions also entails risks. The cheaper credit remains, the greater the temptation for some households to incur debt beyond their long-term financial capacity.


In the event of an economic downturn or a major economic shock, increased pressure could be placed on banks and pension funds. Over time, this could affect credit availability and pension benefits, with indirect repercussions for property owners as well.


Implications for tenants

Evolution of the reference mortgage rate

In Switzerland, rents are linked to the reference mortgage rate, which is calculated quarterly based on average mortgage rates. When this rate declines, landlords may be required to reduce rents. According to current estimates, this development could allow tenants to save around 2–3% on their rent.


However, this adjustment is not immediate, as it depends on the next official publication of the reference rate. A rate pause decided by the SNB therefore does not translate instantly into lower rents, but it stabilizes the trend and reduces short-term risks of unexpected rent increases linked to rising financing costs. For landlords, this means greater cost predictability, while the scope for rent increases remains limited.


Implications for investors

Declining returns on savings

The reduction in policy rates directly weighs on the returns of traditional savings products. In Switzerland, savings accounts currently offer returns close to 0.5%, which are insufficient to preserve the real value of capital over the long term. In this context, many investors are encouraged to diversify their assets.


Real estate emerges as an attractive alternative due to its relatively stable returns, long-term resilience, and tangible asset character. Equities and bonds may complement real estate holdings in order to optimize portfolio diversification.


A favorable environment for real estate investment

Flexible financing conditions strengthen the attractiveness of real estate investments for both domestic and international investors. Lower capital costs make it possible to consider strategic acquisitions under more favorable conditions. Real estate remains particularly sought after in regions where rental demand is structurally high.


Residential and commercial real estate

Residential real estate continues to be perceived as a safe-haven investment. In the short term, returns may come under slight pressure due to potential rent adjustments, but long-term value appreciation remains a key factor for investors.


Commercial real estate—particularly in urban centers and developing districts—also offers attractive prospects for capital seeking stability and predictable returns.


What factors could influence future interest rate developments?

The main source of uncertainty remains the international environment, particularly developments in global markets as well as geopolitical or trade-related risks.


For 2026, growth in the Swiss economy is estimated at around 0.9%, a level below the long-term average. A potential trade agreement could nevertheless mitigate the risks of an economic slowdown.


In this context of moderate growth and external uncertainty, further interest rate cuts appear unlikely, while a rate increase is also not expected in the short term.


Conclusion

Prospective homeowners

  • Low mortgage rates facilitate access to financing.

  • However, strong demand combined with limited supply may continue to exert upward pressure on prices, especially in urban areas.

Current homeowners

  • Lower financing costs reduce mortgage burdens.

  • Property values remain supported by a dynamic market.

Tenants

  • Lower interest rates promote rent stabilization or slight decreases, with a delayed effect.

  • The risk of rapid rent increases remains limited in the short term.

Investors

  • Low savings returns increase the attractiveness of real estate investments.

  • Long-term prospects remain favorable, despite rental yields occasionally coming under pressure.


Sources 

raiffeisen.ch - Article 

rts.ch - Article 

ubs.com - Article 

swisslife.ch - Article 

bernard-nicod-ch - Article