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Old 20.09.2022, 11:13
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Ready for higher interest rates?

After years of negative interest rates and the recent surprise 50bp hike by the SNB - the SNB will make their monetary policy assessment this Thursday and likely end the era of negative rates.

Expectations are a 75bp hike to 0.5% with some calling for 100bp hike to tackle inflation.
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Old 20.09.2022, 11:16
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Re: Ready for higher interest rates?

Such good news. Durable goods and real estate prices going down
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Old 20.09.2022, 12:08
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Re: Ready for higher interest rates?

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Such good news. Durable goods and real estate prices going down
Used car prices are massively up because of supply chain issues... nothing the SNB can do about that I fear.
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Old 20.09.2022, 12:08
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Re: Ready for higher interest rates?

Too slow too late.
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Old 20.09.2022, 12:25
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Re: Ready for higher interest rates?

If indeed the SNB do increase interest rates as you say, the Chf will become more attractive and more people/investment outfits will want to hold Chf meaning they will need to sell €/USD/GBP to buy Chf which in turn will make the Chf stronger and will kill the economy stone dead.



Already with the €/USD/GBP at current levels it makes everything incredibly expensive in Switzerland for anybody who is not paid in Chf, tourist business is killed, no exports as such......


I don't see SNB rising rates by too much, maybe 0.25%, possibly 0.5% but no more. The SNB have already clearly said the Chf is far too strong so by increasing interest rates it certainly won't help the bigger of the 2 problems in my opinion.



Inflation is not such a big problem here at present but a highly over valued Chf is a problem here !
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Old 20.09.2022, 12:45
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Re: Ready for higher interest rates?

Did a forward fix of our mortgage that is due to expire in 2024 in the summer. I wish I‘d known I could do it 3 years in advance, as I would have done it last year and locked in the really low rates.

I don‘t expect a rate increase to impact house prices for two reasons: Affordability tests are done on 5% interest rates (plus amortisation and maintenance); increasing interest rates will mean the rental reference rate can be increased, leading to higher rents.

While the CHF is strong vs. Euro and GBP, it isn‘t especially so against USD. I also don‘t believe that the SNB actually wanted to go negative in the first place and only did so because the ECB did. Hence, as long as the ECB keep raising, so will SNB.
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Old 20.09.2022, 13:01
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Re: Ready for higher interest rates?

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Too slow too late.
absolutely. i was quite disappointed that the central banks didn't start QT already middle of last year and hiking rates soon after. now they left us all a big mess and likely to have a hard recession to undo this mess.

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Used car prices are massively up because of supply chain issues... nothing the SNB can do about that I fear.
speaking on the FED:

supply chain issues are one thing. energy costs feeding into everything is another. monetary policy is not a good instrument to deal with this. you are right, raising rates doesn't produce more cars or more oil.

if they want to try to fix this with higher rates, they basically have to tip the economy into recession so that people can't afford cars or energy so that the demand crashes to balance out the under-supply.
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Old 20.09.2022, 13:04
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Re: Ready for higher interest rates?

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Did a forward fix of our mortgage that is due to expire in 2024 in the summer. I wish I‘d known I could do it 3 years in advance, as I would have done it last year and locked in the really low rates.

I don‘t expect a rate increase to impact house prices for two reasons: Affordability tests are done on 5% interest rates (plus amortisation and maintenance); increasing interest rates will mean the rental reference rate can be increased, leading to higher rents.

While the CHF is strong vs. Euro and GBP, it isn‘t especially so against USD. I also don‘t believe that the SNB actually wanted to go negative in the first place and only did so because the ECB did. Hence, as long as the ECB keep raising, so will SNB.
i think it could have an impact on house prices. if people are borrowing 1.2m and paying 1%, they are paying 1k a month in interest and comparing that to what they pay in rent. a 1% increase in rates already puts that at 2k a month. further increases and buying a house to save on rent doesn't look like such a smart move any more.
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Old 20.09.2022, 13:05
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Re: Ready for higher interest rates?

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If indeed the SNB do increase interest rates as you say, the Chf will become more attractive and more people/investment outfits will want to hold Chf meaning they will need to sell €/USD/GBP to buy Chf which in turn will make the Chf stronger and will kill the economy stone dead.



Already with the €/USD/GBP at current levels it makes everything incredibly expensive in Switzerland for anybody who is not paid in Chf, tourist business is killed, no exports as such......


I don't see SNB rising rates by too much, maybe 0.25%, possibly 0.5% but no more. The SNB have already clearly said the Chf is far too strong so by increasing interest rates it certainly won't help the bigger of the 2 problems in my opinion.


Inflation is not such a big problem here at present but a highly over valued Chf is a problem here !
Doesn't seem to be much of a problem at the moment. Switzerland's trade surplus is holding up quite at the moment under current circumstances. Compare that to the Eurozone, especially Germany where it's falling off a cliff. Germany remarkably looks like she's about to become a net importer next month!

https://tradingeconomics.com/switzer...lance-of-trade







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Did a forward fix of our mortgage that is due to expire in 2024 in the summer. I wish I‘d known I could do it 3 years in advance, as I would have done it last year and locked in the really low rates.
I believe you can only set it 2 years in advance, so no need to kick yourself now
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Old 20.09.2022, 13:38
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Re: Ready for higher interest rates?

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i think it could have an impact on house prices. if people are borrowing 1.2m and paying 1%, they are paying 1k a month in interest and comparing that to what they pay in rent. a 1% increase in rates already puts that at 2k a month. further increases and buying a house to save on rent doesn't look like such a smart move any more.
Depends on the differential between the two I would say. I was shocked by a FB post I saw today by someone looking for an average family place and having lots of competition at the 3,500-4,200 level and this wasn‘t in prime areas. That still buys you quite a bit of mortgage and I expect rents to rise as noted. Prices may also be supported if people rush to buy in fear of further increases.

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I believe you can only set it 2 years in advance, so no need to kick yourself now
RM told me three years, but he‘s been wrong before And your data I didn‘t quote doesn‘t surprise me. The „fair value“ of CHF vs. EUR has been continually updated in favour of a stronger CHF, since the cap was removed. Articles from March say a range around 1.1. So yes overvalued, but not to the extent it was deemed to be in the 2010s.
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Old 20.09.2022, 13:44
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Re: Ready for higher interest rates?

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RM told me three years, but he‘s been wrong before
I was just looking, I think it depends on the provider, most say 2 years in advance, though some do offer 3 year renewal. What's the plan? Stick on a fixed rate now, see how the situation develops, or go for Sauron in summer 2024?
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Old 20.09.2022, 14:03
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Re: Ready for higher interest rates?

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I was just looking, I think it depends on the provider, most say 2 years in advance, though some do offer 3 year renewal. What's the plan? Stick on a fixed rate now, see how the situation develops, or go for Sauron in summer 2024?
The current rates are said to have the predicted rises priced in, with maybe a small rise to come. Right now, Saron makes the most sense. I think you've missed the boat though if its now you want to re-mortgage. Im in the same situation - expiring 2024 - and it's too late to get in for a decent fix now. I will watch world events and if there is no downward adjustment in time, go Saron.
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Old 20.09.2022, 14:10
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Re: Ready for higher interest rates?

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I was just looking, I think it depends on the provider, most say 2 years in advance, though some do offer 3 year renewal. What's the plan? Stick on a fixed rate now, see how the situation develops, or go for Sauron in summer 2024?
We already did the forward fix starting early 2024 to expire 2028 same as our other tranches. I think the rate was around 1.5%. SARON probably would work out better, but for the amounts involved, we‘re happy to have the certainty.
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Old 20.09.2022, 14:18
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Re: Ready for higher interest rates?

Prediction: House prices in Ausserschwyz will crash in 24 months.

How do I know this?

Because that's when I expect I will need to sell this house.
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Old 20.09.2022, 14:27
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Re: Ready for higher interest rates?

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Already with the €/USD/GBP at current levels it makes everything incredibly expensive in Switzerland for anybody who is not paid in Chf, tourist business is killed, no exports as such......
I work in engineering consulting and we export services. Get paid in EUR and USD. The EUR/CHF rate may not look pretty now, but life has always been like this. Good things happen and bad things happen all the time. Compared to risks like coup d´état, civil war or multi-country war, a currency slip is just another day at the (home) office.

Current contracts can be finished with a profit by delivering results faster, less hours. Future contracts can always be adjusted to stay in profit.

Back to currencies, contracts in EUR pay less CHF. However, contracts in USD pay more CHF

Inflation is really interesting because contracts due take into account inflation indices. Maybe EUR/CHF rate is not favorable, but the inflation index in France may compensate. Lazy to look at the numbers now.

Anyway, international business is not for the faint of heart. It's not the end of the world, just a storm that will separate the good sailors from the ones that should have never left the mainland. Worst thing can happen is having less competitors after the storm

Last edited by Axa; 20.09.2022 at 14:37.
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Old 20.09.2022, 15:16
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Re: Ready for higher interest rates?

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I work in engineering consulting and we export services. Get paid in EUR and USD. The EUR/CHF rate may not look pretty now, but life has always been like this. Good things happen and bad things happen all the time. Compared to risks like coup d´état, civil war or multi-country war, a currency slip is just another day at the (home) office.

Current contracts can be finished with a profit by delivering results faster, less hours. Future contracts can always be adjusted to stay in profit.

Back to currencies, contracts in EUR pay less CHF. However, contracts in USD pay more CHF

Inflation is really interesting because contracts due take into account inflation indices. Maybe EUR/CHF rate is not favorable, but the inflation index in France may compensate. Lazy to look at the numbers now.

Anyway, international business is not for the faint of heart. It's not the end of the world, just a storm that will separate the good sailors from the ones that should have never left the mainland. Worst thing can happen is having less competitors after the storm
exactly. a lot less complaining now that business have had a number of years to adapt.
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Old 20.09.2022, 15:40
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Re: Ready for higher interest rates?

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Anyway, international business is not for the faint of heart. It's not the end of the world, just a storm that will separate the good sailors from the ones that should have never left the mainland. Worst thing can happen is having less competitors after the storm
I see things in rather the same way. The short term is going to be quite painful for many, but I think the medium term is already looking more positive as economies and businesses will have to adapt to the current climate, there's simply no other choice.
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Old 20.09.2022, 16:13
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Re: Ready for higher interest rates?

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I don‘t expect a rate increase to impact house prices for two reasons: Affordability tests are done on 5% interest rates (plus amortisation and maintenance); increasing interest rates will mean the rental reference rate can be increased, leading to higher rents.
I'm not sure how this 5% rate is chosen, but wouldn't that also increase? I mean, 10y fixed rates are at 3% now, if banks want a safety buffer, wouldn't make more sense to calculate the affordability at 7-8%?
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Old 20.09.2022, 16:17
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Re: Ready for higher interest rates?

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I'm not sure how this 5% rate is chosen, but wouldn't that also increase? I mean, 10y fixed rates are at 3% now, if banks want a safety buffer, wouldn't make more sense to calculate the affordability at 7-8%?
5% is reasonably chosen as the highest that rates are likely to get to. 7-8% wouldnt match with reality, very few would then be granted any mortgages as they wouldnt meet the threshold.
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Old 20.09.2022, 17:05
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Re: Ready for higher interest rates?

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I'm not sure how this 5% rate is chosen, but wouldn't that also increase? I mean, 10y fixed rates are at 3% now, if banks want a safety buffer, wouldn't make more sense to calculate the affordability at 7-8%?
i think the 5% minimum recognises that rates below 5% were somewhat low and unusual and so they impose a floor rate. if rates go higher, then presumably they will test affordability at higher actual rates.

mortgage holders can be expected to tighten belts and pay more % of take home pay to the mortgage if rates rise higher. after all, it isn't 100% of disposible income that translates to the 5% but only a fraction.
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