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Old 15.05.2010, 20:34
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Mortgage - Fixed/Variable rates

We are in the process of fixing the mortgage rates for our new house. We have heard that the rates will start going up soon. We would like to gather as much info as we can before finalizing it. Where can I get the trend analysis for the mortage rates. Any idea?.

Thanks,
Raja
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Old 18.05.2010, 23:44
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Re: Mortgage - Fixed/Variable rates

comparis.ch and homegate.ch would be the first places to check out. Credit Suisse also has some trend information if i remember right.
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Old 18.05.2010, 23:47
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Re: Mortgage - Fixed/Variable rates

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We are in the process of fixing the mortgage rates for our new house. We have heard that the rates will start going up soon. We would like to gather as much info as we can before finalizing it. Where can I get the trend analysis for the mortage rates. Any idea?.

Thanks,
Raja

My interest rate has just continued to go down , now at 1.4% ( Fortis now taken over by BNP paribas). Where did you hear that they were going up?
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Old 19.05.2010, 10:44
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Re: Mortgage - Fixed/Variable rates

The 3mth libor curves over the next 10 years show a strong rise over the next 6 years - with flattening after then.

The 6mth is also very similar.

Last time I checked a 10 year fixed has you paying 20bps per year for the bank to hold the risk.

Let me know if you need that translated into english
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Old 19.05.2010, 10:57
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Re: Mortgage - Fixed/Variable rates

Basically, the current best-guess from the finance world is that rates will go up in the medium-term. However, the rates are dependent largely on who the world economies and markets fluctuate, and that is basically unpredictable, particularly with regards timing (eg how many people correctly predicted the timing and size of the 2008 market crash?)

Given how low rates are now, it is a fairly safe bet that they will go up again at some point. The question for you is when. If you fix now for 5 years, but rates stay low due to continuing problems in the markets for the next 4 years, you will lose out. However, they might go up sharply over the next year, in which case you would probably win (although given that the bank is probably predicting the same thing, your "win" would not be so much as the premium you pay to fix will be calculated to still give the bank a profit).

So, what should you do? Basically it is very dependent on your personal circumstances. Think of the fixed rate as an insurance policy - you are paying more now for certainty in the future. If you could easily cope if mortgage rates went up to say 4 or 5%, then maybe it is worth getting a variable rate now and taking the chance, which means having the benefit now of lower rates. If you are being quoted say 2.8% to fix now and that is the absolute maximum you can afford, then take the fix. If you fall somewhere in the middle, you could split between a fixed part and a variable part.

For what it is worth, I am on a fully variable LIBOR 3M mortgage at 1.3%. But I could cope if rates went up a lot.

Hope that helps!
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Old 19.05.2010, 11:08
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Re: Mortgage - Fixed/Variable rates

these rates are almost like free money. if i could lock in for 10 years for only 20bps premium, i'd be biting their arm off.
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Old 19.05.2010, 11:44
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Re: Mortgage - Fixed/Variable rates

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these rates are almost like free money. if i could lock in for 10 years for only 20bps premium, i'd be biting their arm off.
The rate is technically: Libor 3mth curve over 10 years + 75bps customer spread + 20bps fixed rate premium.

OR it was when I looked a few months ago - our new 10 year fixed kicks in in 2 weeks.
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Old 08.06.2010, 16:27
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Re: Mortgage - Fixed/Variable rates

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The 3mth libor curves over the next 10 years show a strong rise over the next 6 years - with flattening after then.

The 6mth is also very similar.
How do you know this will be the case? Ie what's your source? I'm VERY interested as am just about to sign a mortgage myself and have been toying w/5yr vs 10 fix. Thanks in advance!
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Old 08.06.2010, 16:46
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Re: Mortgage - Fixed/Variable rates

With rates this low and curves relatively flat the "easy call" is to say borrow (as much as you can) for as long as you can. What is a given is that the downside of not fixing or taking a shorter fix is greater than the upside.
IMHO locking it all up at a nice affordable rate for a long time with a decent Tilgung or provision made to pay down the debt is IMHO the best advice, especially for those who like to sleep at nights. If you do decide to float then please, please at least do the calculation of what your repayments will be if rates go up 1%, 2%, 3%..etc. Then ask your bank if they can provide you with data showing the levels of there floating mortgages over the past 15yrs and make sure you can still pay the bills and put food on the table should rates rise.
Another point people consider less is that the 5yr rate in 5yrs time is (probably) not going to be what is implied from the curve today (life would just be too easy if it was). If you fix for 5yrs then that is when you will need to start looking for another fixed rate or jump onto the floating rate. By pushing that decision out futher you give yourself another 5yrs over which to improve your personal financial situation (pay, savings) meaning you will be in a better position and have more flexibility regardless of where the market rate is at the time..
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Last edited by Shove; 08.06.2010 at 16:47. Reason: spelling
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Old 08.06.2010, 16:57
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Re: Mortgage - Fixed/Variable rates

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IMHO locking it all up at a nice affordable rate for a long time with a decent Tilgung or provision made to pay down the debt is IMHO the best advice, especially for those who like to sleep at nights.
@Shove: My inclination is to lock for 10 yrs with perhaps a small portion on variable so that we can "amortise" (we plan to buy in Vaud) indirectly on the 3a pillier - I still need to get my head around all this tax manipulation that goes on in this fab country.

Any case, for sure, we're going to need a wad of cash at end of current mortgage cuz we don't want to be caught with our pants down if/when the rates go back up and we need to find an new mortgage.
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Old 08.06.2010, 17:29
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Re: Mortgage - Fixed/Variable rates

You can amortise your fixed portion IF you fix the portion you will do so when you fix the interest rate. We have done this with ZKB in the last couple of months.

IE 500,000CHF 10 yr fixed - Each year you will amortise 25,000CHF.

You won't be able to pay off more of the fixed than the 25,000CHF each year. Our mortgage advisory suggested this to us.
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Old 08.06.2010, 18:02
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Re: Mortgage - Fixed/Variable rates

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You can amortise your fixed portion IF you fix the portion you will do so when you fix the interest rate. We have done this with ZKB in the last couple of months.

IE 500,000CHF 10 yr fixed - Each year you will amortise 25,000CHF.

You won't be able to pay off more of the fixed than the 25,000CHF each year. Our mortgage advisory suggested this to us.
Thanks for this - I hadn't realised there was a yearly "cap"/set amount. Good to know!

How long are you in to your mortgage? And, do you feel like you're really gaining from the indirect amortisation (ie tax impact)?
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Old 08.06.2010, 23:08
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Re: Mortgage - Fixed/Variable rates

The amortisation/repayment/Tilgung is set when you take out the loan. I know the German system well, (so hopefully someone can confirm this is the way it works here too) where you agree a Tilgung expressed as a percentage of Nominal, and can often agree an optional payment at no extra cost (or at least it is priced in and you don't get a discount for not taking it).
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Old 22.07.2010, 16:59
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Re: Mortgage - Fixed/Variable rates

Basicly, the risk of the rates going much lower is very small (there is nowhere to go), while the risk of them going up or staying flat is higher.
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Old 22.07.2010, 17:16
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Re: Mortgage - Fixed/Variable rates

The HEV recently published a survey about fixed vs flexible mortgages: http://www.hev-schweiz.ch/home/aktuell/artikel/?tx_ttnews%5Btt_news%5D=3759&cHash=43eea3916f1b1b5 5974ecedf7371e386

Where did you hear that interest rates were on the increase? Our mortgage rate went down again this month (.8% or there abouts).
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Old 22.07.2010, 17:40
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Re: Mortgage - Fixed/Variable rates

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Basicly, the risk of the rates going much lower is very small (there is nowhere to go), while the risk of them going up or staying flat is higher.
If they stay flat you are better off with a variable, as you will not pay the premium involved with a fixed rate deal. Of course rates will go up again at some point - the question is when. No point fixing now if it will take 5 years before rates go up, as you will be paying that premium for 5 years...
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Old 22.07.2010, 18:06
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Re: Mortgage - Fixed/Variable rates

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...Where did you hear that interest rates were on the increase? Our mortgage rate went down again this month (.8% or there abouts).
If you read this press SNB press conference statement: http://www.snb.ch/en/mmr/speeches/id...617_tjn.en.pdf
you will see that the central bank expressed concern about the current mortgage lending practices in Switzerland. The affordability criteria applied by banks are based on the current interest rates which are historically low and which, according to SNB, will inevitably start to rise.
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Old 23.07.2010, 10:11
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Re: Mortgage - Fixed/Variable rates

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If you read this press SNB press conference statement: http://www.snb.ch/en/mmr/speeches/id...617_tjn.en.pdf
you will see that the central bank expressed concern about the current mortgage lending practices in Switzerland. The affordability criteria applied by banks are based on the current interest rates which are historically low and which, according to SNB, will inevitably start to rise.
I don't think anyone doubts that rates will go up again. The real question is when? If they stay low for years, then you would be paying more than necessary if you take a fixed rate deal now. However, you would probably win if you fix and then rates go up in the near future. As no-one knows when they will go up again, that is why you have to make your own decision whether to fix now or stay variable or do a mixture of both, based on your personal circumstances, as I've said a few times in this thread.
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Old 23.07.2010, 10:30
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Re: Mortgage - Fixed/Variable rates

And let's not discount (excuse the pub) paying a premium for peace of mind and a planned budget. I def take this route for my properyy back home since I have enough things to worry about over here.
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Old 23.07.2010, 10:48
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Re: Mortgage - Fixed/Variable rates

Oddly and not for the first time ZKB's (Zurich Cantonal Bank) fixed rates at 1.5% for 2 years are lower than their variable ones at 2.5 - 3.00%.

Why would anyone take a variable one??
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