We will shortly sorting out our financing options for our appt. purchase and with such low variable interest rates, I'm tempted to go with 1 of these for at least part, if not most of our financing. Question is, what are the interest rate forecasts like? Am I right in thinking that a variable mortgage can be converted into a fixed rate after any 3 month cycle, should the rates appear to be rising fast? Or am I commited to a fixed term on this variable? Would appreciate some experiences/opinions on the matter.
Cheers.

UBS offers a CHF LIBOR-linked mortgage which renews every three months. So, I guess that might be what you are looking for. I don't know about the other banks though.

Even though we currently bank with UBS, we're steering well clear of them and will probably end all our dealings very shortly. Don't trust them and didn't get a good "feeling" with them. At all.

does this help?

http://www.postfinance.ch/pf/content...g/compare.html

i think you are referring to the 'dynamic' rate in the link above when talking about variable rates. as you can see if you have a dynamic mortgage (3years) at the moment the rate is 1.35%, and is recalculated every three months, but the maximum it can be during those 3 years will be 3.7%, is if rates go mad, you have 'some' short term protection.

you are really going to have to sit down and do the numbers and speculate what the interest rates AND what your personal circumstances will be like over the coming years/decades.

i think the general feeling is that rates will go up but when they start going up and how sharply is difficult to say. but its swings and roundabouts: if you lock in now (fixed) at a low rate for 7 years what is the situation going to be like when you come to renew at that time. chances are you will be on a higher rate, but will your salary be higher or expenses (planning on having kids?) higher! the risk is built in in the future. with a fully dynamic you are risking more short term. bit of both might be a better option.

over the lifetime of the mortgage its a tough one! )C;

i've always found it difficult to see where we as consumers win in the mortgage and insewerance business! these guys have professional employed to squeeze every last penny out of the rates they provide to make them profits, not us!

Thanks Bill, we're actually goiung to go with Postfinance. Very impressed with them, I must admit.

this might be useful too:

http://www.wikihow.com/Create-a-Mort...icrosoft-Excel

this is for the traditional UK/IE mortgage where you pay off the capital. I have been meaning to modify it and make it work for a CH model. perhaps start there and play with it and see how things go.

obviously virus scan this before you use it! (c;

Rates are low and likely to stay low across the world for some time. All governments are effectively moving to zero interest rates in an attempt to reflate their economies. It will last a long time. One thing, there isnt that much room for them to go down.

Oh well, thanks anyway Snoopy. Much appreciate the answer...

When we borrowed here we googled and found historical Libor rates. The rate was never above something like 7%.

When looking at fixed rates, you are paying considerably more. To win with fixed rates, the variable interest rate would have to go above the fixed deal by more than the difference for longer than you would have benefited from a variable rate being under the fixed rate. Say a variable deal is 1% and fixed 3%, and it took 3 years for the interest rate to be raised to 3%. The interest rate would have to remain above 3% for more than 3 years for you to win on a fixed deal.

Variable rates have been the best option for me the past 12 years and 5 mortgages. I would never consider fixing at the current rates they are offering. 3% for 5 years is a joke. The highest variable interest rate I paid recently was 3.55% - and that was for less than 2 years when it reduced again.

I am currently on a 1 month Libor and every month I pay less I also look every month what fixed rates they are offering, but at 3% I will be paying 3 times as much

with the UBS Libor mortgage, you can jump off the roller coaster any time (i.e. at the end of any quarter) and transfer outstanding balance to a fixed rate mortgage.

you obviously haven't been reading about the li'l mess the "professionals" have gotten themselves into the last few months, have you?

The OP has an allergy to the UBS.

OK, this is a bit of an older thread...but (as I inferred to in the housing in ZH thread) what about 1.8% for 5 years, also a joke? Would you still not consider fixing in a rate now?

you can get libor rates at around 1% now and 10 year fixed for around 2.5%.

so you pay 2.5x more interest, but since the interest is so small, is it really worth squeezing out the extra few points for security over the 10 years. it really depends how well you are able to ride out the change if LIBOR rates increase to over 2.5%.

for me the difference wasn't worth the security towards the rate security towards the tail end of the 10 year term.

over a 5 year term, i'd probably take LIBOR over a fixed. for me 10 year is on the cusp of the decision and a 15 year fix (around 3%) wins out over the LIBOR for me.

interesting! Thanks...over crunching the numbers at the moment and my head is starting to spin!

Just looked at the CS website and 2.6% for 10 years in tempting but that's almost 4x the rate we are paying now on a 1 month libor. If rates went up fast I would reduce my mortgage with the money I have saved by not fixing It all depends on your attitute to risk. I'm willing to take the risk and not pay the bank my hard earned money when I don't have to.

With the franc so high they are unlikely to increase interest rates until inflation strikes.

I know...at least comparing the 2 year to the 10 year fixed, the 10 year costs me 9k more a year, and the 5 year is about 3500 more... of course, who knows what the new rates will be in 2 years when time to renew (if we choose the 2 year route)!

agree with you. rates look to stay low in the near term. a near term fix is unlikely to pay off.

the 15 year fix at 2.9% is very tempting!

don't forget to knock tax off your interest costs. so if you have 25% tax rate, then you 9k of costs will be only 6.75k of costs post-tax.

One comment re: long term fixes. On the surface they are very attractive. Just consider, what is the chance that in the next 10-15 years you may want to either pay off your mortgage (or a substantial part of it) or maybe more likely to sell the property (and hence cease mortgage). Such long term fixed deals could incur significant penalties in these scenarios.