The rising interest rate level in Switzerland is also making itself felt in personal loans. Many providers raised their interest rates with further increases are expected.
Whether purchasing a new car or buying furniture, financing larger expenditures, or bridging a financial bottleneck, many Swiss regularly turn to consumer and personal loans.
The Swiss National Bank's (SNB) decision to begin raising its benchmark rate to combat rising inflation is now making itself felt with higher rates on consumer loans, a survey of the comparison portal Moneyland.ch (in German) shows. Average interest rates for personal loans are rising and those who want or need to take out a consumer loan have to dig deeper and deeper into their pockets.
Further Increases
«Various Swiss credit providers have already raised interest rates, and further increases are to be expected, says Moneyland managing director Benjamin Manz.
The portal evaluates published offerers from the lenders' minimum and maximum rates for their consumer credit. The unweighted average of the minimum interest rate for January is 5.17 percent, versus 4.83 percent a year ago. Maximum rates registered an increase to 8.66 percent from 8.49 percent.
Minimum rates ranged between 3.5 percent from Lend to Cembra's 7.95 percent. The maximum was between 5.9 percent at Migros Bank and Jurassische Kantonalbank to 9.95 percent at Cembra.
The increase in rates began starting the second half of 2022. Four out of eleven Swiss personal loan providers already increased their published interest rates, Moneyland writes. Such lenders fill a market niche since most Swiss banks do not offer personal loans.
Creditworthiness Key Determinant
The data does not provide information about the actual average cost of new consumer loans. The rate a borrower pays for a loan is strongly dependent on creditworthiness and other factors. It is only after an assessment that the customer made an offer.
The maximum interest rate allowed by law for consumer loans is set at least once a year by the Federal Department of Justice and Police (EJPB) and is currently 10 percent for personal loans and 12 percent for credit card loans. It is based on the SNB's Saron rate compounded over three months, known as the SAR3MC rate.
Maximum Rates Set to Rise
According to Moneyland, a 1 percent increase is likely for both types of loans, with even higher maximum rates possible if the SNB continues to raise the Saron rate.
The EJPB would not provide Moneyland with details on when such an adjustment might occur. «We are aware of ongoing and likely upcoming adjustments in the markets and therefore adjustments in interest rates,» the department said in a statement.
Manz expects that if that happens, many lending providers will again raise lending rates. «Given the current Swiss monetary policy, it can generally be assumed that loans will become even more expensive in the coming months.»
Rate Hikes Not Ruled Out
Following its policy meeting on December 15, the SNB said that given inflationary pressures, «it cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term.»
Yesterday, former SNB President Philippe Hildebrand told «Bloomberg» in an interview that financial markets are «far too optimistic» to believe central banks will loosen their policies. «I don't see any chances of easing this year,» Hildebrand said.
