Breaking:

If you use Foxit to read your PDFs, watch out for this flaw that allows malware to infect your machines

new information that will not reassure you

Buschmann in the ntv “early start”: “Brussels also has to step on the bureaucratic brakes”

Army and Netanyahu in deep disagreement over Gaza war

Deals of the day: Remington’s best-selling curling iron is heavily discounted

Rising reference interest rate – rent increases are now being communicated – the most important answers – News

14 June 2023

Contents

The reference interest rate is rising for the first time in 15 years – with some major effects on rents. An overview.

The reference interest rate has risen for the first time since 2008. This makes it possible for property owners to increase rents in existing contracts. Many tenants have now been informed of this. SRF business editor Manuel Rentsch answers the most pressing questions.

Manuel Rentsch is business editor at Radio SRF. He can often be heard on the SRF 3 Wirtschaft show.

What’s new?

On June 1, the reference interest rate rose for the first time since 2008 – to 1.5 percent from the previous 1.25 percent. This was announced by the Federal Office for Housing (BWO). The reference interest rate is an important component for calculating the rents of the current contracts.

What are the implications of the increase to 1.5 percent?

A quarter percentage point increase in the reference interest rate means that the rents of the existing contracts can be increased by three percent. However, there are limitations. Only those rents that are based on the current reference interest rate of 1.25 percent may be increased. In other words, those homeowners who have passed on the reductions to tenants in recent years are allowed to raise rents.

Residential buildings in the Affoltern district of Zurich.

How many households will be affected by the rent increase?

There are more than two million households in rented apartments in Switzerland. Around half of these leases are based on the current reference interest rate. This means that a rent increase in Switzerland could potentially affect more than a million households. However, many homeowners will certainly forgo an increase.

All households with leases based on the current reference interest rate of 1.25 percent must potentially expect an increase in rent. In the case of older tenancies, the rent may only be increased if all reference interest rate reductions have previously been passed on by the landlord.

The tenants’ association warns against abusive rent increases. Tenants should therefore take a close look at a rent increase, the association advises. In order to defend themselves against abusive increases, tenants must lodge an objection with the competent arbitration board within 30 days of receiving notification.

In order to be able to check the rent increase, the tenants’ association provides information on its website a rent calculator ready. There are also found Templates of personalized letters of challenge. The arbitration process is free of charge.

When will rents go up?

The rents can be increased on the next termination date. Most contracts provide for a notice period of three months. This means that most rent increases could be implemented by October 1st.

How much do rents increase in a year?

It can be assumed that the reference interest rate will continue to rise, probably to 1.75 percent as early as December. Together with the increase announced today, this would entitle the tenant to a six percent rent increase. In addition, the landlords can claim the accrued inflation as a general cost increase. All of these elements can add up to a 10 percent increase in rents within a year.

How much will rents rise in the medium term?

Assuming inflation remains high and interest rates continue to rise, this could lead to a 10 to 20 percent increase in rents in the coming years compared to the current level. However, there are also factors that could slow the rise. For example, if a lot should be built and this creates competition. In addition, such a sharp increase in rents would be unbearable for many households and homeowners will therefore probably not take full advantage of the rent increases.

Why is the reference interest rate increasing?

Interest rates in Switzerland are generally rising. For example, the National Bank has raised the key interest rate from minus 0.75 percent to plus 1.5 percent, and long-term interest rates on the capital market have climbed. As a result, the banks increased mortgage interest rates, which has a delayed effect on the reference interest rate.

In a first step, the average interest rate of all domestic mortgage claims of the banks is calculated. The total amount of mortgages included in the calculation is CHF 1,132 billion. The outstanding mortgages have different maturities and different interest rates. An average is calculated from this and the reference interest rate is then the value rounded to a quarter of a percent.

How has the reference interest rate developed?

The reference interest rate was introduced in 2008 as a concept and as a basis for calculating rents. At that time, the reference interest rate was 3.5 percent. Since then, this value has fallen continuously – until today. This also means that a number of tenants have benefited from a reduction in rent. Now there is a trend reversal. The reference interest rate is calculated and published quarterly – always on the first working day of March, June, September and December.

What is the bottom line?

Many households in Switzerland will sooner or later have to pay higher rents. This is after the additional costs for heating and hot water have already increased and the health insurance premiums are increasing. Many people worry about their own financial situation, as recent consumer sentiment surveys show.