The Swiss National Bank (SNB) decided today to lower the key interest rate from 1.75 percent to 1.5 percent, a very positive signal for the market. As inflation has been within the target range since June last year, the call for an interest rate cut has now been implemented earlier than expected.
SNB lowers key interest rate as inflation declines
The SNB always bases its key interest rate decision on the inflation forecast. In February, inflation was again below expectations at 1.2 percentage points. The SNB has thus decided to lower the key interest rate, which indicates an active monetary policy measure that will further stimulate the economy. This sends a signal that the danger of inflation has been averted in the medium term.
Reasons for lowering the key interest rate
The SNB‘s decision to lower the key interest rate is likely due to various factors. One possible explanation could be the intention to promote lending in order to further drive economic growth. This could also be aimed at weakening the currently strong Swiss franc and boosting exports.
Effects on property owners and buyers
For property owners and buyers, the reduction in the key interest rate could have both positive and negative effects. On the one hand, lower interest rates could reduce financing costs and increase demand for real estate. On the other hand, this could lead to an overheating of the real estate market and drive prices up further, which could pose a challenge for potential buyers.
Effects on supply and demand for residential property
The reduction in the key interest rate to 1.5 percentage points should have a positive impact on the supply of and demand for residential property. The lower interest rate increases the attractiveness of real estate investments.
Source: Raiffeisen
Mortgages: With the reduction in the key interest rate, mortgage rates are likely to remain stable or even fall further for the time being. This means relief for both current and potential property owners, as they do not have to fear any additional burdens from rising mortgage interest rates for the time being.
Real estate prices: Real estate prices should now be less exposed to strong fluctuations as financing costs remain stable. One possible consequence could be a strengthening of the real estate market, as lower interest rates increase the attractiveness of real estate investments.
Rents: It is likely that there will be fewer incentives for further rent increases for the time being. However, it remains to be seen how the reference interest rate will develop as a result of this decision.
Borrowing costs: Borrowing costs will remain constant for the time being, which could encourage more stable demand for consumer goods and investments. This stability could help to stimulate the economy by continuing to offer companies and consumers favorable financing options.
Conclusion
The SNB’s reduction in the key interest rate from 1.75 to 1.5 percentage points sends a clear signal to the markets. Both property owners and tenants can expect more stability as a result of this decision. However, it remains to be seen how this decision will affect the economy and the real estate market in particular in the long term. Property owners and buyers should follow developments closely and adjust their financial planning accordingly.
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