Swiss face rent hikes with first mortgage gauge jump in 15 years

SWITZERLAND’S national benchmark for mortgage costs rose the first time in its history, setting up thousands of tenants on the country’s high-price housing market for rent increases.

After years of decline, the reference interest rate for rents ticked from 1.25 per cent to 1.5 per cent, the Federal Office of Housing said on Thursday (Jun 1). Under Swiss law, a benchmark increase by a quarter percentage-point allows landlords to raise rents by 3 per cent.

The increase – valid from Friday – is driven by the Swiss National Bank’s increase of borrowing costs to fight inflation. Even so, economists have warned that the subsequent wave of rent hikes might itself fan consumer-price growth.

The quarterly-calculated benchmark was introduced in 2008 and is based on the average interest rate of domestic mortgages in Swiss francs. Economists predict a further increase on at least one of the next two publication dates, on Sept 1 and Dec 1.

While rents are set to rise, prices on Switzerland’s real estate market show signs of weakening. BLOOMBERG