Mortgage benchmark fall paves way for potential rent cuts in Switzerland

Switzerland is a land of renters compared to many other countries in Europe. Nearly 60% of households rent a roof over their heads rather than taking out a mortgage loan to buy their own property. Keystone / Ennio Leanza

Switzerland’s national benchmark for mortgage costs dropped to the level it had before the global inflation surge, potentially setting up tenants on the country’s high-price housing market for rent cuts.

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After increases in line with interest rates, the reference interest rate for rents was now set at 1.5%, down from 1.75%, the Federal Office for Housing said on Monday.

Under Swiss law, a benchmark decrease by a quarter percentage-point enables tenants to demand a rent cut by 3%.

The decrease — valid from Tuesday — is driven by the Swiss National Bank’s lowering of borrowing costs due to weak inflation. Depending on how strongly rent cuts weigh on consumer-price growth, they could become another factor subduing the gauge in Switzerland.

Economists expect the result to feed through to inflation figures during the second half of this year.

Not all tenants will be able to claim a rent reduction as that depends on which reference rate a contract is based on. Some landlords might not have passed on increases from the previous hikes of the benchmark.

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