What impact will latest bank interest rate cut have on Swiss consumers?
In an unexpected move, the Swiss National Bank cut the interest rate by quarter point. How will this move impact consumers?
After raising its rate to 1.75 percent in 2022 and maintaining it at this level until now, the central bank (SNB) lowered it back to 1.50 percent on Thursday.
Contrary to the situation following Russia's invasion of Ukraine, which affected global economy and Switzerland’s usually low inflation spiked to 3.4 percent, the new reduction of interest rate “has been made possible because the fight against inflation over the past two and a half years has been effective,” the bank said.
Monetary policy assessment: The press release and introductory remarks delivered by the Governing Board members at the news conference are available on our website (in English, German, French and Italian):https://t.co/U22xZxbUNE pic.twitter.com/uhzNzKMqp4
— Swiss National Bank (@SNB_BNS) March 21, 2024
“For some months now, inflation has been back below 2 percent, and thus in the range the SNB equates with price stability.”
The bank's forecasts indicate that “inflation is also likely to remain in this range over the next few years.”
What does this move mean for Switzerland’s consumers?
It could have both positive and (slightly) negative impact on household finances.
Much depends on whether you are planning to spend your money or save it.
If you are looking to buy big-ticket items that are usually purchased with credit — like homes or vehicles, for instance — then you are in luck.
That’s because when a central bank lowers its interest rates, loans become cheaper. So if you qualify for a loan, this is a good time to apply for one.
READ ALSO: Does having a good credit score matter in Switzerland?
In terms of mortgages, they are likely to become cheaper as well when interest rates drop.
This, however, is only the case for new mortgages or ones that are due for renewal.
If you have a fixed-rate mortgage which is not up for renewal, then you will not be able to benefit from lower interest rates.
What about the money you have in the bank?
That’s where the news is not as good.
When the SNB raised its rates from 1.50 to 1.75 percent in December 2022, a number of Swiss banks offered a slightly higher yield on certain types of savings and investments.
It is therefore logical that when the opposite happens — that is, when interest rates dwindle — so do returns on your assets.
At this point, however, it is not yet sure when this ‘drop’ in yields will happen, or by how much.
What, if any, impact will this move have on rents?
With the interest rate turnaround — and given a positive forecast on the inflation front — there will probably be no further hike in the reference interest rate in the immediate future.
And because the central bank lowered the key interest rate earlier than expected, there could perhaps be rent reductions later this year — but that remains to be seen.
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After raising its rate to 1.75 percent in 2022 and maintaining it at this level until now, the central bank (SNB) lowered it back to 1.50 percent on Thursday.
Contrary to the situation following Russia's invasion of Ukraine, which affected global economy and Switzerland’s usually low inflation spiked to 3.4 percent, the new reduction of interest rate “has been made possible because the fight against inflation over the past two and a half years has been effective,” the bank said.
Monetary policy assessment: The press release and introductory remarks delivered by the Governing Board members at the news conference are available on our website (in English, German, French and Italian):https://t.co/U22xZxbUNE pic.twitter.com/uhzNzKMqp4
— Swiss National Bank (@SNB_BNS) March 21, 2024
“For some months now, inflation has been back below 2 percent, and thus in the range the SNB equates with price stability.”
The bank's forecasts indicate that “inflation is also likely to remain in this range over the next few years.”
What does this move mean for Switzerland’s consumers?
It could have both positive and (slightly) negative impact on household finances.
Much depends on whether you are planning to spend your money or save it.
If you are looking to buy big-ticket items that are usually purchased with credit — like homes or vehicles, for instance — then you are in luck.
That’s because when a central bank lowers its interest rates, loans become cheaper. So if you qualify for a loan, this is a good time to apply for one.
READ ALSO: Does having a good credit score matter in Switzerland?
In terms of mortgages, they are likely to become cheaper as well when interest rates drop.
This, however, is only the case for new mortgages or ones that are due for renewal.
If you have a fixed-rate mortgage which is not up for renewal, then you will not be able to benefit from lower interest rates.
What about the money you have in the bank?
That’s where the news is not as good.
When the SNB raised its rates from 1.50 to 1.75 percent in December 2022, a number of Swiss banks offered a slightly higher yield on certain types of savings and investments.
It is therefore logical that when the opposite happens — that is, when interest rates dwindle — so do returns on your assets.
At this point, however, it is not yet sure when this ‘drop’ in yields will happen, or by how much.
What, if any, impact will this move have on rents?
With the interest rate turnaround — and given a positive forecast on the inflation front — there will probably be no further hike in the reference interest rate in the immediate future.
And because the central bank lowered the key interest rate earlier than expected, there could perhaps be rent reductions later this year — but that remains to be seen.
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