Negative rates – the beginning of the end?
The Swiss Bankers Associations (SBA) has started a campaign to convince the Swiss National Bank (SNB) to end negative rates.
At the end of 2014, the SNB introduced negative interest rates applied to the liquid asset reserves of Swiss financial institutions deposited with the National Bank. This action, combined with the economic situation, resulted in a steep drop in mortgage rates, which have been at a historic low since.
You may remember that the SNB adopted this measure highlighting the over-valuation of the Swiss franc (high pressure on exchange rates), price instability, and, above all, a gloomy economic outlook.
Most banks tried, where possible, not to let the negative rates affect the savings of their clients. However, the last recalcitrant institutions finally capitulated. Almost all banks now invoice their clients’ liquid assets at negative rates for amounts that exceed an increasingly lower threshold. As a consequence, some savers now find part of their savings being drained by negative rates.
The Swiss Bankers Association decided to take steps to convince the SNB to put an end to negative rates. A few days after the federal election, it published a study explaining that the reasons put forward by the National Bank were no longer relevant and that maintaining negative rates was putting the economy at risk. Negative rates encouraged debt and brought about a shortage of pension fund investments.
These arguments highlight the risks that affect firstly Swiss pensions and then, more generally, all taxpayers. The absence of a response from federal managers could result in negative public opinion. It is a safe bet that the subject will soon be raised by the governing bodies.
The beginning of the end for historically low mortgage rates has probably started. We advise all our clients to set their mortgage interest rates as soon as possible.
Our advisors are available to identify the best rates on the market.
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