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Credit Suisse Mortgage Interest Rate Forecasts
March 5, 2015
Only a slight rise in long-term mortgage rates expected
The abandonment of the EUR exchange rate floor by the Swiss National
Bank will have a negative impact on growth in the Swiss economy this
year. Due to the appreciation shock, there is a risk that the expected
growth in exports will grind to a halt. In parallel, the super-cycle in the
domestic economy is showing signs of fatigue. Growth in the Swiss economy in 2015 is therefore likely to be significantly lower than previously expected. However, we view the risk of a recession in Switzerland as minimal. Significantly negative inflation rates should be expected in the coming months, on the other hand. Even though the SNB has dropped the
Fix mortgage, 3y
Fix mortgage, 5y
Fix mortgage, 10y
Fix mortgage, 15y
Flex rollover mortgage (3-month LIBOR)
Interest rate in %
6
5
currency floor, it will continue to put the development of
the Swiss franc at the forefront of monetary policy. The
target band for key interest rates is likely to remain between -1.25% and -0.25% over the next 12 months.
Interest rates for Flex rollover mortgages are therefore
likely to remain at their current all-time low. Fix mortgage
rates are not expected to fall any further. The reason lies
in the higher hedging costs currently incurred by financial
institutions due to negative interest rates. Given the prevailing uncertainty, temporary fluctuations in either direction cannot be ruled out. Fix mortgages with a short term
are generally expected to move sideways during the 12month period. In the case of mortgages with a medium
to long term, on the other hand, interest rates are likely
to rise by between 5 and 25 basis points.
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mortgage Interest Rate Forecasts
Interest rate
Forecasts for
Trend
05.03.2015 3 Mt. 6 Mt. 12 Mt. 12 Mt.
Flex rollover mortgage1
1.02
1.05
1.05
1.05

Fix mortgage (3 years)
1.12
1.10
1.10
1.10

2
Fix mortgage (5 years)
1.39
1.40
1.40
1.45

2
Fix mortgage (10 years)
2.01
1.95
2.05
2.20

Fix mortgage (15 years)2
2.46
2.45
2.50
2.70

2
The table shows how the interest rate burden can vary
depending on the mortgage type and term selected.
The forecasts provide an insight into the potential
trends of the mortgages over a three, six and twelvemonth horizon. The Flex rollover mortgage is expected
to move sideways over the coming 12 months. Interest
rates for Fix mortgages with a medium or long term are
likely to rise by between 5 and 25 basis points.
The interest rates listed are indicative values and apply to top-quality residential property and
borrowers with impeccable creditworthiness.
1
Flex rollover mortgage (framework term five years). Interest rate based on three-month CHF
LIBOR. Interest rate adjusted every three months.
2
Fix mortgages. Fixed term and interest rate for the entire term.
We would be pleased to advise you: Why not arrange a personal consultation with your client advisor?
You can also find further information at www.credit-suisse.com/mortgages.
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Credit Suisse Financing
March 5, 2015
A suitable product mix depends on your individual risk profile as well as the choice, term and
composition of the products.
Your risk profile reflects the amount of flexibility you want and your willingness to tolerate interest
rate fluctuations.
Combining different products allows you to take possible interest rate risks into account. Staggering the terms enables you to optimize renewals.
Please contact your client advisor to receive the optimal product solution for your individual
needs. He or she will put together the right product with the appropriate term and weighting.
Product Mix Suggestion
Suggestions are based on the latest mortgage interest forecast. They may deviate from your personal needs.
Risk profile
Possible product options
Explanation
Security-oriented:
Fix mortgages with different terms, e.g.:
 Low tolerance of interest-rate
fluctuations
 Little flexibility required
 Medium to long-term horizon
 40%: 8-year Fix mortgage
 60%: 12-year Fix mortgage
Current interest rates allow you to lock in the low interest rates on a Fix mortgage for a long period.
Splitting the mortgage into two terms is advisable because, if rates go up in the future, only part of the
mortgage principal will need to be renewed. We recommend putting 40% to 60% in a long-term Fix
mortgage.
Balanced:
Combined Fix and Flex rollover mortgage,
e.g.:
 Willing to accept average
fluctuations in interest
 Medium flexibility desired
 Medium-term horizon
Dynamic:
Low mortgage interest rates at present speak in favor of a combination of Fix and Flex rollover mortgages. Placing a significant 50% to 70% of your financing in a Fix mortgage takes into account your
 70%: 12-year Fix mortgage
 30%: 3-month Flex rollover mortgage need for security, and ensures low interest rates for
the long term.
Low Fix mortgage interest rates at present speak in
favor of hedging part of the loan for the long term.
Therefore, we recommend locking 20% to 30% of
your financing into a long-term Fix mortgage. At the
 30%: 12-year Fix mortgage
 70%: 3-month Flex rollover mortgage same time, having a significant share in a Flex
rollover mortgage is attractive. Alternatively, the
current interest rate situation also allows for a
significant portion to be fixed on a medium-term
basis.
Combined Fix and Flex rollover mortgage,
e.g.:
 Willingness to accept high
fluctuations in interest
 High flexibility required
 Relatively short-term horizon
Long-Term Mortgages: A Comparison
A sample calculation demonstrates the current attractiveness of long-term mortgages
Start date
Characteristics
2008
(Oct. 1, 2008)
2015
(March 2, 2015)
Mortgage
CHF 500,000
CHF 500,000
10 years
10 years
Interest rate
4.50%
1.97%
Interest cost over term
CHF 225,000
CHF 98,500
Term
1
Interest saving over term
1
CHF 126,500
The interest rates shown are indicative. They apply to prime, owner-occupied residential real estate and borrowers with first-class credit status. All information is subject to
change without notice.
We would be pleased to advise you: Why not arrange a personal consultation with your client advisor?
You can also find further information at www.credit-suisse.com/mortgages.
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Credit Suisse Mortgage Solutions
March 5, 2015
Fix Mortgage
10
Interest rates for new mortgages in %
Fix mortgage (3 years)
Fix mortgage (5 years)
Fix mortgage (10 years)
Fix mortgage (15 years)
Average Fix mortgage (5 years)
9
8
7
6
5
4
3
2
1
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Lock in to Lower Long-Term Interest Rates
Interest rates on Fix mortgages are at a very low level. Despite the SNB's negative interest rates, they
are not expected to fall any further. The reason for
this lies in the higher hedging costs currently being
caused by negative interest rates. On a 12-month
horizon, we expect a sideways movement for Fix
mortgages with a short term and a rise in interest
rates for those with a medium to long term. A Fix
mortgage enables borrowers to secure an attractive
interest rate over the years.
Description of the Fix Mortgage/Forward Fix
mortgage
The Fix mortgage comes with a fixed interest rate
over a fixed term. This type of mortgage is particularly
suitable if you are looking for security and predictable
mortgage interest costs. Our Forward Fix mortgage
enables you to fix your mortgage interest rate early or
extend your mortgage by up to 24 months in advance.
Schematic illustration:
Flex Rollover Mortgage
5
Interest-rate development for mortgage taken out in March 2010
Flex rollover mortgage (3M tranches)
Fix mortgage (5 years)
4
Variable-rate mortgage
3
2
1
0
03. 2010
03. 2011
03. 2012
03. 2013
03. 2014
Schematic illustration:
Stay Flexible
The Flex rollover mortgage, which is based on the 3month LIBOR, gives borrowers the flexibility to react
to a changed situation. With interest rates expected
to remain low, the Flex rollover is still an attractive option. Although the Fix mortgage allows the borrower
to lock in to a low interest rate for a long period of
time, the Flex rollover mortgage is an attractive option
in the current period of low interest rates – at least
for partial financing.
03. 2015
Description of the Flex Rollover Mortgage
The Flex rollover mortgage lets you choose the overall term and decide the periods (tranches) following
which the mortgage interest rate will be recalculated.
The mortgage interest rate is linked to the LIBOR
rate and recalculated at the start of each new tranche
based on current market conditions. The Flex rollover
mortgage is particularly suitable for those wishing to
take advantage of current interest rates throughout
their chosen term of tranche.
Optimum Combination of Security and Flexibility
Combining mortgage products is a good way to obtain an optimum mix of security and flexibility. For example, by taking out various Fix
mortgages with different terms you can reduce the risk of having to extend the entire mortgage amount during a period of high interest
rates. Alternatively, depending on the personal risk profile, the Fix mortgage can be combined with a Flex rollover mortgage. The Flex
rollover portion of the mortgage allows the client to react to interest rate changes flexibly. As far as interest costs are concerned, the Fix
mortgage component provides the required budget security.
We would be pleased to advise you: Why not arrange a personal consultation with your client advisor?
You can also find further information at www.credit-suisse.com/mortgages.
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This document was produced for information purposes and use by the recipient only. It does not constitute an offer or invitation to enter into any type of financial transaction.
No guarantee is made regarding the reliability or completeness of this document, nor shall any liability be accepted for any losses that arise from its use. All opinions and estimates expressed in this document constitute our judgment at the time of publication and do not constitute general or specific investment/financing, legal, tax or accounting advice of any kind. The information and opinions contained in this document originate from sources that we consider to be reliable. This document may not be distributed in the
United States or passed on to any US person (within the meaning of the current version of Regulation S of the US Securities Act 1933). The same applies in all other jurisdictions, except where permitted under the applicable laws. Copyright © 2015 Credit Suisse Group AG and/or its affiliates. All rights reserved.
CREDIT SUISSE AG
P.O. Box 100
CH-8070 Zurich
www.credit-suisse.com
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