Reference interest rate remains at 1.25 percent: What this means for tenants and owners

On September 1, 2026, the Federal Office for Housing (FOH) announced that the mortgage reference interest rate will remain at 1.25 percent. It thus remains at its historic low, which it has held since September 2, 2025. For tenants, this decision means: the current announcement does not give rise to a new claim for a reduction or for an increase. However, those who have not yet exercised their claims from the reductions in 2025 can still do so.

How the reference interest rate is determined

The reference interest rate is based on the volume-weighted average interest rate of all domestic mortgage claims of Swiss banks. This was recorded as of June 30, 2026, and remains unchanged at 1.31 percent. Since the legally relevant rate is rounded commercially to the nearest quarter percent, a reference interest rate of 1.25 percent will continue to apply from September 2, 2026.

The rate will remain at this level until the average interest rate falls below 1.13 percent or rises above 1.37 percent. The next FOH announcement is scheduled for December 1, 2026.

Many tenants forgo money

The reference interest rate fell from 1.75 to 1.50 percent in March 2025, and to 1.25 percent in September 2025. Each reduction of 0.25 percentage points generally results in a claim for a reduction of about 3 percent on the net rent. However, rents do not decrease automatically: tenants must request the reduction from their landlord.

And this is precisely where things are lacking. According to an analysis by the Zurich Cantonal Bank, by April 2026, only just under 12 percent of those entitled had requested the second reduction. The Swiss Tenants’ Association (MVS) estimates the average savings potential at around 65 francs per month. Since the last reduction, about 75,000 rental agreements have been checked with the association’s rent calculator; in 67 percent of the cases, there was a valid claim for a reduction.

One caveat remains: landlords can counter a reduction request under certain conditions with increased maintenance costs or accumulated inflation. Whether and to what extent the rent actually falls therefore depends on the individual tenancy. What matters is the reference interest rate on which the current rent is based. This value can be found in the rental contract or the last rent adjustment.

A further reduction is virtually ruled out

The downward potential has been exhausted. For the reference interest rate to fall to 1.00 percent, the average interest rate would have to fall below 1.13 percent. According to Raiffeisen chief economist Fredy Hasenmaile, this would theoretically only be possible from mid-2030 at the earliest if conditions remain unchanged. By then, the Swiss National Bank (SNB) will likely have long since said goodbye to its zero interest rate policy. Even in the negative interest rate phase from 2015 to 2022, the reference interest rate never fell below 1.25 percent.

A rise is more likely in the medium term. UBS expects an increase to 1.50 percent by the end of 2027, while Zurich Cantonal Bank does not expect it until the end of 2028. According to Hasenmaile, this would require two interest rate hikes by the SNB. An increase of the reference interest rate by 0.25 percentage points would allow landlords to raise rents by about 3 percent, provided the rent is based on the current rate of 1.25 percent.

What the decision means for mortgage holders

The stable average interest rate of 1.31 percent reflects the reality of the mortgage market: after the SNB’s interest rate cuts, the interest rate level has settled at a low rate. Saron mortgages continue to benefit from the National Bank’s zero interest rate policy, and even medium- to long-term fixed-rate mortgages remain at historically low levels.

For owners of investment properties, the unchanged rate is news with two sides. On the one hand, there is no threat of additional downward pressure on target rents. On the other hand, the scope for reference-rate-related rent increases will remain closed for the time being. Anyone calculating financing should therefore set income expectations conservatively and not bet on a rapid rise of the reference interest rate.

Sources

• Federal Office for Housing: Mortgage reference interest rate in rental agreements remains at 1.25 percent, press release of September 1, 2026
• Federal Office for Housing: Mortgage reference interest rate (overview page with historical development)
• Swiss Tenants’ Association: The reference interest rate has fallen again (incl. rent calculator)
• SRF News: Mortgage reference rate remains at historic low, September 1, 2026