Transaction activity rebounded by 5% compared to Q2, with average mortgage sizes holding steady and a +3% quarter-on-quarter property price uplift underscoring the market’s stabilization. Loan-to-value ratios on residential mortgages remained largely unchanged at 73%, highlighting a balanced risk environment despite selective bank lending policies.

Residential Mortgages: Confidence Fuels Growth

Self-occupied residential mortgages remain the cornerstone of market expansion, contributing the lion’s share of new volumes. The average mortgage size increased to CHF 751,000 (+6.9% YoY), reflecting steady transaction prices and returning borrower confidence.

SARON-linked mortgages retained their cost advantage, with a typical margin of 0.90% compared to 1.66% for 10-year fixed rates. On an average CHF 900,000 loan, this translates into approximately CHF 7,000 in annual savings—nearly double the benefit borrowers enjoyed in Q2.

Approval rates for residential files remain robust at above 95%, with more than five lenders typically prepared to finance quality borrowers. Competitive dynamics also intensified: the spread between best and worst offers narrowed further to 0.70%, down from 0.92% in Q2, trimming potential annual savings to around CHF 6,300 (vs. CHF 8,000 previously).

While banks remain cautious overall, competition is quietly returning, as regional lenders and insurers re-enter the market, though often constrained by backlogs from the first half of the year.

Investment Properties: Recovery Signs, but Volumes Still Pressured

The investment property segment recorded its first meaningful rebound since 2024, with a 5% increase in the number of new loans compared to Q2. However, this activity did not yet translate into higher aggregate mortgage volumes. Average investment mortgage sizes declined by 3% quarter-on-quarter, slipping to CHF 1.2 million—the second-lowest level of the past 13 quarters.

This reduction reflects banks’ ongoing deleveraging and preference for low-LTV transactions. Larger refinancings, particularly for assets above CHF 15 million, remain difficult amid Basel III constraints, reduced leverage allowances, and conservative bank valuations (still ~20–25% below market prices).

Lenders continue to focus on prime files with robust cash flows or conservative leverage. Approvals remain limited, with fewer than two-thirds of non-core investment applications receiving favorable outcomes. Nevertheless, the narrowing of terms between residential and investment mortgages suggests the foundations of a cautious recovery.

Rates and Lender Landscape: Opportunity with Selectivity

SARON mortgages remain the most cost-effective option across Switzerland, though long-term fixed rates also stay attractive amid low margins. Across both products, bank spreads have stabilized, with a slight uptick on 10-year fixed rates (1.10% vs. 1.00% in Q2).

Key Q3 dynamics:

• Margins stable across SARON and fixed-rate products.
• Best-worst lender spreads tightened to 0.70% (down 20% vs. Q2).
• Insurers continue their gradual re-entry into the mortgage market, primarily on select residential and low-LTV investment loans.
• Development financing—land and construction loans—remains the hardest to secure, with no easing in Q3 across regions.
• Liquidity constraints still influence strategies, with banks prioritizing high-quality residential borrowers and legacy client relationships.

Outlook: Interest Rate Stability and Tax Reform Impact

Looking ahead to Q4 2025, the market is expected to maintain momentum:

• Real estate valuations should continue to edge upward, supported by strong demand and lender appetite to place liquidity post-Basel III adjustments.
• Reference rates remain stable, with opposing forces—the strong franc and U.S. tax reforms—likely balancing further monetary easing.
• Margins may narrow slightly as SARON-linked mortgages gain share, shifting the product mix.
• Liquidity remains abundant, with banks seeking more lending opportunities under the low-rate environment.

Special Focus: Rental Value Tax Abolition

The September 28, 2025 vote to abolish the imputed rental value tax passed with 57.7% approval. The reform, expected to take effect no earlier than 2028, will reshape mortgage and real estate dynamics:

• Short-term: A renovation boom is likely as owners rush to claim deductions before the transition.
• Medium-term: Property values could rise 2–3% as lower tax burdens support demand, though older properties requiring renovation may lag.
• Long-term: Mortgage debt growth may slow as interest deductibility disappears, raising net financing costs by 20–30%. High-leverage strategies will lose appeal, reducing systemic risk.