Mortgage rates : review of a turbulent year and outlook

In 2022, rates proved to be very volatile creating strong instability. Why and what to expect for 2023?

The evolution of short-term rates depends mainly on the evolution of the central banks’ base rate. We started 2022 with an SNB base rate of -0.75% and an average mortgage rate of 0.70%. As the Consumer Price Index exceeded the 3.5% threshold this summer, the SNB applied a +1.25% increase in its base rate. This allowed the index to fall back to 3%. The base rate therefore went from -0.75% to 0.50% and the average customer mortgage rate was recorded at 1.20% in November.

With fixed rates, it is supply and demand together with interbank confidence that act as a barometer. At the beginning of 2022, the Confederation was borrowing its 10-year funds at 0%, while financial institutions were charging themselves on average at 0.20%. This low spread demonstrated excellent confidence in the interbank market. The 10-year Confederation bond rate then rose to peaks around 1.50%. At the same time, interbank confidence deteriorated and the difference between the Confederation rate and the US Tax Administration (IRS) rate increased to almost 1%. This stress on the interbank market, combined with a loss of interest in the Swiss franc, drove customer rates up to an average 10-year rate of 2.80% by October.

For 2023, everyone agrees that we will soon have reached the peak of the rise in base rates and that the average short-term rates should not increase further by more than 1%. As far as long-term rates are concerned, with the current economic and political situation, it is difficult to comment on the evolution of the CHF borrowing rate or on bank confidence generally. The average10-year rate could reach 3%, with high volatility.

Yannis Eggert

Senior Premium Credit Advisor 
and Co-founder of

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