The SARON mortgage is currently a very popular form of mortgage financing. But what do you have to look out for when taking out a SARON mortgage? Do all lenders offer the same conditions for the SARON mortgage? We would be happy to tell you!
What is a SARON mortgage?
The SARON mortgage is a money market mortgage with a varying interest rate. It is therefore suitable for clients who wish to benefit from generally favourable money market interest rates and accept certain fluctuations in the interest rate. SARON stands for Swiss Average Ratio Overnight Mortgage (SARON for short) and is an interbank interest rate at which the Swiss National Bank and Swiss banks lend money to each other. The customer interest rate of a SARON mortgage is made up of the SARON interest rate and the customer margin fixed in advance. The interest period is usually three months, with the amount of the interest payment to be made being fixed on the second-last day of the interest period. The SARON mortgage is particularly suitable for people who want unlimited and flexible financing and can cope with short-term fluctuations in interest rates. Last but not least, the noticeable rise in interest rates on fixed-rate mortgages in recent months has led homeowners to increasingly switch to money market mortgages, as these have so far been spared from the rise in interest rates. It is therefore worth keeping an eye on interest rate levels and comparing lenders.
Are there differences in SARON mortgages?
Yes, there are significant differences in SARON mortgages depending on the lender. In particular, you should look out for the following important points when comparing SARON mortgages:
Is there a framework term?
Do I have a customer interest margin guaranteed during the term?
What are the exit conditions and is there a notice period?
Under what conditions may I switch to a fixed-rate mortgage?
SARON mortgages are subject to a framework term of three to five years with most lenders. For customers, this means that the fixed customer margin does not change during the term. For example, you currently (as of 29 November 2022) pay SARON 0.43% plus 0.55% customer margin = 0.98% customer interest. A fixed client margin means that the lender may not make any adjustment to the 0.55% premium to the prevailing SARON level during the framework term of the contract. This margin security can be important in times of rising SARON key interest rates. There are already some banks that have increased the customer margin in the SARON. This is often justified on the part of the capital providers by higher risk costs, but actually only means that the margin for the capital providers is decreasing and they therefore want to demand this increase in costs on the part of the customer.
In principle, it is possible to change to a fixed-rate mortgage in SARON at the end of each 3-month period. The change of the mortgage model is therefore flexible, but you are bound to the lender. If, on the other hand, you wish to terminate the SARON mortgage early and change providers, you can usually only do so by paying the so-called early repayment penalty.
However, there are also lenders who do not offer a fixed or only a 1-year framework term in the SARON offer. As a customer, you benefit from a very high degree of flexibility and can therefore amortise the mortgage or change the lender every year. On the other hand, such high flexibility also entails certain risks for you as a client. The lender is able to adjust the fixed customer margin upwards at any time at the end of the term. There is therefore no certainty that you will pay a fixed margin premium for 3 or 5 years.
Is it possible to mix mortgage products?
Yes, a split between fixed-rate mortgages and SARON mortgages is possible. Especially in times of uncertain developments on the interest rate market, it can be an exciting strategy to split different tranches into fixed-rate mortgages and SARON mortgages. In this way, you have somewhat hedged the risk of interest rate fluctuations and can still benefit from a more attractive average interest rate across all tranches. We would be happy to show you a tailor-made solution for you and give you advice.
Would you like to learn more about the SARON mortgage and find out if it is the right mortgage model for you? Get in touch with our team of experts, we will be happy to help you find the right financing solution!