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Old 16.06.2022, 14:37
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SNB rises rates to -0.25%

Wow, unexpected by me, at least at this stage...

https://www.cnbc.com/2022/06/16/swis...f-a-point.html
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Old 16.06.2022, 14:39
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Re: SNB rises rates to -0.25%

1.0135
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Old 16.06.2022, 14:41
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Swiss National Bank half percent rate increase

CHF was for a few moments at parity to the euro, markets bouncing around.

Very happy I fixed my mortgage interest for ten years at the turn of this year.

Bank of England raised a quarter point, £ fell slightly against CHF.

Both reactions to the US Fed raising rates by 0.75% yesterday.
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Old 17.06.2022, 10:55
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Re: SNB rises rates to -0.25%

I didn't realise how high the housing cost overburden rate was in Switzerland. I wonder if this is priced into consideration for the SNB calculations for further rate rises?



https://ec.europa.eu/eurostat/web/pr...ddn-20210209-1
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Old 17.06.2022, 11:01
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Re: SNB rises rates to -0.25%

And I did not know what the "housing cost overburden rate" is at all.
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Old 17.06.2022, 11:07
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Re: SNB rises rates to -0.25%

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And I did not know what the "housing cost overburden rate" is at all.
TBH I didn't think this was even allowed in Switzerland.

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The housing cost overburden rate is defined as the percentage of the population living in households where total housing costs represent more than 40% of disposable income (both 'net' of housing allowances).
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Old 17.06.2022, 11:09
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Re: SNB rises rates to -0.25%

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I didn't realise how high the housing cost overburden rate was in Switzerland. I wonder if this is priced into consideration for the SNB calculations for further rate rises?
Don't think so. From the link you shared the graph shows Swiss and EU citizens are doing just fine. Non-EU citzens are about 800K people according to Swiss stats, or 10% of the population.



On the other hand, the statistic is "fraction of population living in households spending 40% or more of their income on housing". As non-EU citizen myself, I just wonder how many of my buddies underreport income. Maybe they don't live here at all, just have residency, a minimal reported income and a huge bank account
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Old 17.06.2022, 11:15
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Re: SNB rises rates to -0.25%

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Don't think so. From the link you shared the graph shows Swiss and EU citizens are doing just fine. Non-EU citzens are about 800K people according to Swiss stats, or 10% of the population.

On the other hand, the statistic is "fraction of population living in households spending 40% or more of their income on housing". As non-EU citizen myself, I just wonder how many of my buddies underreport income. Maybe they don't live here at all, just have residency, a minimal reported income and a huge bank account
Swiss data must be skewed by the high foreign population. Low interest rate generally here means it shouldn't be a big issue, still surprised at the amount of people spending so much on housing though.
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Old 17.06.2022, 11:25
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Re: SNB rises rates to -0.25%

I just remembered this other thread where one person with a big heart was willing to put his income in the application, so another one with lower income will not be rejected. Do things like this are that common to skew stats?

https://www.englishforum.ch/housing-...-register.html

Sorry, I'm on Friday mood Back to serious stuff. This should not happen in the rental market because there are filters. In principle, no one will rent you a place that eats more than 30% of your income. But, people changes jobs or layoffs, business goes up and down for self-employed, and people find themselves in the situation of paying 40+% of their income in rent.
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Old 17.06.2022, 11:34
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Re: SNB rises rates to -0.25%

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I.... In principle, no one will rent you a place that eats more than 30% of your income. But, people changes jobs or layoffs, business goes up and down for self-employed, and people find themselves in the situation of paying 40+% of their income in rent.
What if one is retired and living on capital?
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Old 17.06.2022, 11:54
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Re: SNB rises rates to -0.25%

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Don't think so. From the link you shared the graph shows Swiss and EU citizens are doing just fine. Non-EU citzens are about 800K people according to Swiss
I would not completely agree with the conclusion even though Switzerland indeed has a high portion of foreign population. Even Swiss are above EU average. Probably nothing too much of a concern but still probably a concern for SNB. Besides it does not matter too much which part of the population is affected, it can nevertheless start off a cascade.
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Old 17.06.2022, 11:57
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Re: SNB rises rates to -0.25%

Presumably, these "housing costs" stats include rent as well as mortgage payments??
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Old 17.06.2022, 12:09
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Re: SNB rises rates to -0.25%

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And I did not know what the "housing cost overburden rate" is at all.
Neither did I until I saw it in this thread.
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Old 17.06.2022, 12:13
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Re: SNB rises rates to -0.25%

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Back to serious stuff. This should not happen in the rental market because there are filters. In principle, no one will rent you a place that eats more than 30% of your income. But, people changes jobs or layoffs, business goes up and down for self-employed, and people find themselves in the situation of paying 40+% of their income in rent.
Isnít it 30% of gross income? 30% gross could easily become greater than 40% of net income depending on the circumstances.
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Old 17.06.2022, 12:17
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Re: SNB rises rates to -0.25%

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Isnít it 30% of gross income? 30% gross could easily become greater than 40% of net income depending on the circumstances.
Yes, often the quoted "rule of thumb" is not more than 1/3 of gross. Which is crazy high.
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Old 17.06.2022, 12:56
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Re: SNB rises rates to -0.25%

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Yes, often the quoted "rule of thumb" is not more than 1/3 of gross. Which is crazy high.
If interest rates continue to rise then I think it'll push many into the 1/3 of gross bracket and beyond, including renters!
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Old 17.06.2022, 13:28
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Re: SNB rises rates to -0.25%

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Isnít it 30% of gross income? 30% gross could easily become greater than 40% of net income depending on the circumstances.
That is something I am also confused about, found different info at different places, including mortgage calculators.

It is indeed the case for us that salary dedutions are above 40%. If we're to take a mortgage or rent with 30% of gross we are left with less than 30% of gross. As gross can easily change this is too high a risk to take and personally wouldn't do it.
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Old 20.06.2022, 10:50
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Re: SNB rises rates to -0.25%

Always remember that the verb zittern (tremble in fear) is an staple of Blick headlines. Anyway, if there's smoke the might be a fire:

Quote:
After SNB interest rate decision - One in five could lose their house
Mortgages are becoming more expensive, while house prices are falling for the first time in years. Hundreds of thousands now have to tremble for their homes.
I do love the 1st world problems approach to housing:

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Homeowners are more comfortable than tenants: they don't have to worry about being evicted for their own use, they can decide for themselves the color of the tiles in the bathroom and, on top of that, they live more cheaply. This logic was valid for a long time - and is now faltering.
Are you already trembling? Well, a reminder that you should be trembling by now

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Since the Swiss National Bank (SNB) surprisingly raised the key interest rate from minus 0.75 to minus 0.25 percentage points on Thursday, many homeowners have had to tremble for their homes. Mortgage interest rates had already risen over the past few months. Now the rise in interest rates on mortgages is getting a boost.
Why would someone get a variable interest rate loan in uncertain times? Gamblers do that, but politically correct Blick prefers to use the term homeowners.

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Fixed-rate mortgages have long climbed above the three percent mark. Many homeowners have therefore recently taken out short-term Saron mortgages. These are variable mortgages with short terms . The Saron is recalculated every day, so the key interest rate decision by the SNB also has an impact accordingly.

At the moment the Saron is still below one percent. But because it is closely based on the key interest rate, an interest rate jump of half a percentage point is now pending. And the end of the road is far from being reached, real estate expert Donato Scognamiglio (52) from the consulting firm Iazi warns in the "Sonntagszeitung": "The supposed security of all those who have fled from fixed to short-term mortgages could turn out to be a risk. Many homeowners will have a problem."

The SNB is likely to raise the key interest rate again in September - SNB President Thomas Jordan (59) indicated this this week. This could also increase the interest rates for Saron mortgages to three percent and more.
And, OMG!!!!!, if you stop servicing a loan, the repo man may knock your door, outrageous!!! This kind of things must only happen to poor immigrants, not to well-to-do families with a single unit home with a garden, we're totally not faking it until we make it!!!

Quote:
In its financial stability report, the SNB calculates that with a mortgage interest rate of three percent, 20 percent of homeowners will no longer meet their bank's affordability rules. With a home ownership rate of around 40 percent, this affects more than 600,000 people!

With interest rates rising, housing costs suddenly exceed a third of their income. Anyone who obediently continues to pay their mortgage debts is under observation by the bank, but need not immediately fear for their home. However, anyone who defaults on payments is in bad shape. In the worst case, there is a risk of losing your home.
We're now into surreal humor territory where prices only go up, OK Boomer.

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In addition to interest rates, homeowners are also concerned about the price level. Because while there was only one direction for real estate for years (upwards), this trend has recently turned into the opposite.
Blick spares a few lines for the underclass that rents a place to live. But, WE don't have to tremble in fear, only pay higher rent and make our landlords happy

Quote:
However, it will not only be uncomfortable for homeowners – but ultimately also for tenants. They hardly benefit from the falling prices on the real estate market. On the contrary: in the longer term, the higher key interest rate will also lead to an increase in the reference interest rate – and thus to higher rents. It will probably take another two to three years before that happens.
https://www.blick.ch/wirtschaft/nach...d17590454.html
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Old 20.06.2022, 11:06
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Re: SNB rises rates to -0.25%

The interest rate changes have only just started but have quite a substantial impact due to the extremely low starting point.

Someone paying 600 a month in interest under a 0.75% rate would pay 2'400 per month if it moved to 3%.
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Old 20.06.2022, 11:14
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Re: SNB rises rates to -0.25%

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The interest rate changes have only just started but have quite a substantial impact due to the extremely low starting point.

Someone paying 600 a month in interest under a 0.75% rate would pay 2'400 per month if it moved to 3%.
If someone that pays 600 a month could not service a 2'400 monthly loan payment, what would be the action?

A) Close the eyes, deny the environment is changing, and be stubborn until the bitter end, only to get the home repossessed anyway?.

B) Acknowledge it's an uphill battle, sell the place while prices are still high, move to cheaper place while the storm lasts, and maybe even make a profit from the sale.

After all, this is about money. Or, is it really about the freedom to choose the color of bathroom tiles as Blick naively describes home ownership?
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