Credit Suisse Mortgage Interest Rate Forecasts
February 4, 2016
Ups and Downs in Fix Mortgage Interest Rates Set to Continue
The Swiss economy has not yet found its feet again. A broad-based recovery in exports cannot be expected as long as the Swiss franc remains
strong. What's more, the factors supporting the domestic economy are
losing momentum and there are no signs of any strong growth drivers. We
therefore expect the economy to grow by just 1.0% in 2016. The ongoing
economic recovery in the Eurozone and USA is likely to be supportive to
growth. The slump in oil prices and rise in the value of the Swiss franc
have pushed inflation into firmly negative territory. With base effects now
petering out, inflation is likely to
Fix mortgage, 3y
Fix mortgage, 5y
Fix mortgage, 10y
Fix mortgage, 15y
Flex rollover mortgage (3-month LIBOR)
Interest rate in %
6
5
4
3
move back toward zero over the course of the year. This
will allow the Swiss National Bank (SNB) to continue
putting the development of the Swiss franc at the forefront of monetary policy. The target band for key interest
rates is likely to remain between –1.25% and –0.25%
over the next 12 months. We therefore expect interest
rates for Flex rollover mortgages to remain at their current all-time low. As for Fix mortgage interest rates, the
future direction will be heavily dependent on the hedging
costs incurred by financial institutions due to negative interest rates. Given the prevailing uncertainty, temporary
fluctuations in either direction must be expected. Fix
mortgages with a short or medium term are expected to
move sideways overall during the 12-month period. A
slight rise of 20 to 30 basis points is expected for longterm mortgages, on the other hand – not least because
further rate hikes are likely in the USA.
2
1
0
2000
2002
2004
2006
2008
2010
2012
2014
2016
Mortgage Interest Rate Forecasts
Interest rate
Forecasts for
Trend
04.02.2016 3 Mt. 6 Mt. 12 Mt. 12 Mt.
Flex rollover mortgage
1
Fix mortgage (3 years)2
Fix mortgage (5 years)
1.02
1.02
1.02
1.02

1.04
1.05
1.05
1.05

1.13
1.15
1.15
1.15

2
Fix mortgage (10 years)
1.71
1.75
1.80
2.00

Fix mortgage (15 years)2
2.13
2.15
2.20
2.40

2
The table shows how the interest rate burden can vary
depending on the mortgage type and term selected.
The forecasts provide an insight into the potential
trends of the mortgages over a 3, 6 and 12-month
horizon. The Flex rollover mortgage is expected to
move sideways over the coming 12 months. In the
case of long-term Fix mortgages, interest rates are
likely to rise by 20 to 30 basis points.
The interest rates listed are indicative values and apply to top-quality residential property and
borrowers with impeccable creditworthiness.
1
Flex rollover mortgage (framework term three years). Interest rate based on three-month CHF
LIBOR. Interest rate adjusted every three months.
2
Fix mortgages. Fixed term and interest rate for the entire term.
We would be pleased to advise you: Why not arrange a personal consultation with your client advisor?
You can also find further information at www.credit-suisse.com/mortgages.
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Credit Suisse Financing
February 4, 2016
A suitable product mix depends on your individual risk profile as well as the choice, term and
composition of the products.
Your risk profile reflects the amount of flexibility you want and your willingness to tolerate interest
rate fluctuations.
Combining different products allows you to take possible interest rate risks into account. Staggering the terms lessens the risk of the entire mortgage amount having to be extended in a period of high interest rates.
Please contact your client advisor to receive the optimal product solution for your individual
needs. He or she will put together the right product with the appropriate term and weighting.
Product Mix Suggestion
Suggestions are based on the latest mortgage interest forecast. They may deviate from your personal needs.
Risk profile
Possible product options
Explanation
Security-oriented:
Fix mortgages with different terms, e.g.:
 Low tolerance of interest-rate
fluctuations
 Little flexibility required
 Medium to long-term horizon
 40%: 8-year Fix mortgage
 60%: 12-year Fix mortgage
Current interest rates allow you to lock in the low interest rates on a Fix mortgage for a long period.
Splitting the mortgage into two terms is advisable because, if rates go up in the future, only part of the
mortgage principal will need to be renewed. We recommend putting 40% to 60% in a long-term Fix
mortgage.
Balanced:
Combined Fix and Flex rollover mortgage,
e.g.:
 Willing to accept average
fluctuations in interest
 Medium flexibility desired
 Medium-term horizon
Dynamic:
Low mortgage interest rates at present speak in favor of a combination of Fix and Flex rollover mortgages. Placing a significant 50% to 70% of your financing in a Fix mortgage takes into account your
 70%: 12-year Fix mortgage
 30%: 3-month Flex rollover mortgage need for security, and ensures low interest rates for
the long term.
Low Fix mortgage interest rates at present speak in
favor of hedging part of the loan for the long term.
Therefore, we recommend locking 20% to 30% of
your financing into a long-term Fix mortgage. At the
 30%: 12-year Fix mortgage
 70%: 3-month Flex rollover mortgage same time, having a significant share in a Flex
rollover mortgage is attractive. Alternatively, the
current interest rate situation also allows for a
significant portion to be fixed on a medium-term
basis.
Combined Fix and Flex rollover mortgage,
e.g.:
 Willingness to accept high
fluctuations in interest
 High flexibility required
 Relatively short-term horizon
Long-Term Mortgages: A Comparison
A sample calculation demonstrates the current attractiveness of long-term mortgages
Start date
Characteristics
2008
(Oct. 1, 2008)
2016
(Feb. 1, 2016)
Mortgage
CHF 500,000
CHF 500,000
10 years
10 years
Interest rate
4.50%
1.72%
Interest cost over term
CHF 225,000
CHF 86,000
Term
1
Interest saving over term
1
The interest rates shown are indicative. They apply to prime,
owner-occupied residential real estate and borrowers with firstclass credit status. All information is subject to change without
notice.
CHF 139,000
We would be pleased to advise you: Why not arrange a personal consultation with your client advisor?
You can also find further information at www.credit-suisse.com/mortgages.
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Credit Suisse Mortgage Solutions
February 4, 2016
Fix Mortgage
10
Interest rates for new mortgages in %
Fix mortgage (3 years)
Fix mortgage (5 years)
Fix mortgage (10 years)
Fix mortgage (15 years)
Average Fix mortgage (5 years)
9
8
7
6
5
4
3
2
1
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Lock in to Lower Long-Term Interest Rates
Interest rates on Fix mortgages are at a very low level. Their future direction is heavily dependent on the
hedging costs incurred by financial institutions due to
negative interest rates. Given the prevailing uncertainty, temporary fluctuations in either direction must
be expected. On a 12-month view, we expect a
sideways movement for Fix mortgages with a short
and medium term and a slight rise in interest rates for
those with a long term. A Fix mortgage enables borrowers to secure an attractive interest rate for a
number of years.
Description of the Fix Mortgage/Forward Fix
mortgage
The Fix mortgage comes with a fixed interest rate
over a fixed term. This type of mortgage is particularly
suitable if you are looking for security and predictable
mortgage interest costs. Our Forward Fix mortgage
enables you to fix your mortgage interest rate early or
extend your mortgage by up to 36 months in advance.
Schematic illustration:
Flex Rollover Mortgage
5
Interest-rate development for mortgage taken out in February 2011
Flex rollover mortgage (3M tranches)
Fix mortgage (5 years)
4
Variable-rate mortgage
3
2
1
0
02. 2011
02. 2012
02. 2013
02. 2014
02. 2015
Schematic illustration:
Stay Flexible
The Flex rollover mortgage, which is based on the 3month LIBOR, gives borrowers the flexibility to react
to a changed situation. With interest rates expected
to remain low, the Flex rollover is still an attractive option. Although the Fix mortgage allows the borrower
to lock in to a low interest rate for a long period of
time, the Flex rollover mortgage is an attractive option
in the current period of low interest rates – at least
for partial financing.
02. 2016
Description of the Flex Rollover Mortgage
The Flex rollover mortgage lets you choose the overall term and decide the periods (tranches) following
which the mortgage interest rate will be recalculated.
The mortgage interest rate is linked to the LIBOR
rate and recalculated at the start of each new tranche
based on current market conditions. The Flex rollover
mortgage is particularly suitable for those wishing to
take advantage of current interest rates throughout
their chosen term of tranche.
Optimum Combination of Security and Flexibility
Combining mortgage products is a good way to obtain an optimum mix of security and flexibility. For example, by taking out various Fix
mortgages with different terms you can reduce the risk of having to extend the entire mortgage amount during a period of high interest
rates. Alternatively, depending on the personal risk profile, the Fix mortgage can be combined with a Flex rollover mortgage. The Flex
rollover portion of the mortgage allows the client to react to interest rate changes flexibly. As far as interest costs are concerned, the Fix
mortgage component provides the required budget security.
We would be pleased to advise you: Why not arrange a personal consultation with your client advisor?
You can also find further information at www.credit-suisse.com/mortgages.
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This document was produced for information purposes and use by the recipient only. It does not constitute an offer or invitation to enter into any type of financial transaction.
No guarantee is made regarding the reliability or completeness of this document, nor shall any liability be accepted for any losses that arise from its use. All opinions and estimates expressed in this document constitute our judgment at the time of publication and do not constitute general or specific investment/financing, legal, tax or accounting advice of any kind. The information and opinions contained in this document originate from sources that we consider to be reliable. This document may not be distributed in the
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