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Zero interest mortage: a reality for some borrowers

Blog | News

For several years now, mortgage rates have been lower and lower, reaching very low levels in recent months. Is a zero interest mortgage possible? Who would benefit from such low rates?

Mortgage rate development

Since the 2000s, there is a clear trend towards lower mortgage interest rate. Thus, the average fixed interest rate for a 10 mortage waas around 5.5% in 2000. This year, the same rate is now below 2%. For shorter mortage duration, or for variable rate mortage, there are even lower rates!

A reality for all types of rates

This week, the average interest rate (all types of rates and duration) has been calculated at 1.73% only (Swiss Federal Office of Housing)! That is a new record. For example, a 500,000 CHF mortgage costs:

  • With 5.5% rate (2000): 2083 Chf / month.
  • With a 1.73% rate (2016): 729 Chf / month.

Get a lower rate

To be realist, a zero interest mortgage is an exception. However, it is possible to get a really low rate by taking advantage of the current rates which are especially advantageous now. In order to get such a low rate, the borrower can:

  • Choose a fixed rate mortgage with a shorter duration. Also, the rate could increase once the contract is over.
  • To move towards a variable rate mortgage: but the risk is even higher to see the rate increase. Also, the risk can be mitigated by the possibility to change its mortgage for a fixed rate contract.

Zero interest mortgage: what are the risks?

The risks of a really low interest rate are linked to changes in the marketplace. Thus, we can easily imagine a situation where a 2% mortage is manageable for an person’s budget. But what is this rate strongly increases once the contract is over? The risk is higher for short term mortgage, or variable rate mortgage. That means it is important to remain cautious when signing a mortgage. Better be sure to be able to pay the costs event with a rate increase.

A specialist next to you

Multicredit can help you to benefit from a lower mortgage rate. You will benefit from assistance for your mortgage request.