admin Oct 06, 2023
The financial world is subject to constant change and last year was no exception. With interest rate increases due to prevailing inflation, the markets have been particularly challenged. Loans are also subject to these changes in the financial world and are changing the terms for consumers. In this blog post, we take a close look at the expected consumer loan rate hike and its potential impact on loan terms. In doing so, we shed light on why now might be an opportune time to consider a loan.
Conditional inflation forecast September 2023
According to the Swiss National Bank's monetary policy assessment of September 21, 2023, the inflation rate is expected to increase at the end of this year. Although Switzerland has so far been comparatively little affected by inflation in view of the global situation, the SNB has continuously raised the key interest rate. With the expected increase in inflation, the key interest rate could also be raised in response.
Outlook for the maximum interest rate on consumer loans
The maximum interest rate on consumer loans is regulated by law in Switzerland to protect consumers. According to Art. 1, Para. 1 of the Verordnung zum Konsumkreditgesetz (VKKG), the following applies:
The maximum value for the interest rate according to Art. 9, Para. 2, Letter b KKG (maximum interest rate) is composed of:
a. the saron compounded over 3 months (SAR3MC); and
b. a surcharge of 10 percentage points.
SARON (Swiss Average Rate Overnight) represents the average interest rate at which commercial banks in Switzerland borrow money overnight. It is determined by the exchange operator SIX on the basis of actual transactions. This rate is crucial because it serves as a reference for numerous financial products on the market. The Swiss National Bank uses its monetary policy to ensure that the SARON remains as close as possible to its own key interest rate.[1] [2]
The Federal Department of Justice and Police (FDJP), which is responsible for adjusting the maximum interest rate for consumer loans, has already set an increase as of May 1. Currently, the maximum interest rate is 11% for cash loans and 13% for overdrafts.
Development of the SARON
The current SAR3MC interest rate is 1.71%. According to the VKKG, the maximum interest rate for consumer loans could be raised from the current 11% to 12%. As already explained, an increase in the key interest rate and thus in the SARON is likely in view of the SNB's current forecasts. An increase would have been possible as early as August. However, the timing of a recalculation of the maximum interest rate is at the discretion of the Federal Department of Justice and Police (FDJP), but must be done at least once a year. At the moment, a decline in inflation is rather unlikely, which is why we assume that the maximum interest rate will rise in the coming months.
Why take out a loan now?
Banks are known to follow the maximum interest rate for consumer loans in order to achieve the maximum returns. As a platform for borrowers and lenders, when the maximum interest rate increases, we are also forced to adjust our rates to remain competitive for our investors. For you, however, higher interest rates result in poorer loan terms. Currently, we offer attractive personal loans with interest rates starting at 5.9%, so right now would be a good time to take out a loan. According to our estimates, it is unlikely that after an increase in the maximum interest rate, the interest rate will be lowered again in the foreseeable future.
Despite the favorable conditions, it is important to handle loans responsibly. We will be happy to advise you and try to find the best solution for your financial situation with you.
If you have any further questions or need assistance, we are at your disposal. You can reach us by phone at 041 525 33 77 or by e-mail at [email protected].
We would be happy to accompany you on your financial journey.
[1] https://www.vermoegenszentrum.ch/wissen/saron-hypothek-das-sollten-sie-wissen#b
[2] https://www.snb.ch/de/iabout/monpol/id/qas_gp_ums_1#t4
