Libor-rate mortgage

Libor-rate mortgage

The Libor-rate mortgage guarantees you a great deal of freedom by enabling you to modify the conditions of your loan or even to make quarterly repayments.

Very attractive short-term rates
Every quarter you can opt for a variable or fixed-rate loan
You are in a position to be able to react very quickly if interest rates start to rise

The LIBOR rate may be replaced beyond 2021

Following the announcement by the UK Financial Conduct Authority on 27 July 2017, the fixing of the LIBOR reference interest rate will probably be abandoned at the end of 2021. To date, there is no impact on the products offered by BCGE.
On 27 July 2017, the Financial Conduct Authority announced that it would no longer compel member banks to fix the LIBOR benchmark interest rate beyond 2021. This decision is likely to have an impact on the Swiss market for loans to individuals and businesses.
LIBOR stands for London Interbank Offered Rate. This benchmark interest rate is fixed daily on the basis of rate conditions declared by a panel of banks, in different currencies (USD, CHF, GBP, EUR and JPY) and for different maturities. It allows commercial banks to determine the interest rates applicable to loans indexed on the money market, such as corporate loans or LIBOR mortgages.
The Financial Conduct Authority justified its decision by arguing that the fixing of the LIBOR rate is not primarily based on transactions. In addition, the volume of unsecured transactions on the interbank market has fallen sharply. As a result, the rate loses its relevance.

The National Working Group on Swiss Franc Reference Rates (NWG) aims to identify alternative benchmark interest rates. It reviews proposals for the reform of benchmark interest rates and discusses the latest international developments. The presidency is held jointly by a representative of the private sector and a representative of the Swiss National Bank.
On 5 October 2017, the working group recommended that the SARON (Swiss Average Rate Overnight) be used as an alternative rate as soon as possible. The SARON is the overnight benchmark interest rate based on Repo market data (Sale and Repurchase Agreement) in Swiss francs (pledge rate).

For the time being, there is no impact on the products offered by BCGE. Clients can continue to obtain LIBOR mortgages. A new equivalent benchmark rate for the client will be applied when LIBOR is no longer used or available.
BCGE is currently studying alternatives to replace the LIBOR rate and will communicate any new developments in due course.

The essentials

A flexible mortgage to optimise your borrowing

The Libor* rate mortgage offers immense flexibility and carries one of the lowest money market rates. You are able to modify the conditions of your loan or even to make quarterly repayments. To get the best from it, we strongly advise you to closely follow the rates' trend on the financial markets. 
You can react very quickly to rises in interest rates by simply asking your adviser to transform your Libor rate mortgage into a fixed rate mortgage as from for the beginning of the next calendar quarter based on the rate on the day you make your request. 
In this way you optimise the rate risk by spreading your loan over a short-term rate (Libor rate) and a medium- or long-term rate (fixed rate of 2 to 15 years). 
* LIBOR: London Interbank Offered Rate



Further information

Minimum amount

CHF 200,000


Interest rate

The interest rate on your mortgage is determined based on the 3-month CHF LIBOR* rate, published each day in the financial pages of the leading daily newspapers. The interest rate is revised every 3 months, at the beginning of each calendar quarter. For current rates, please ask your adviser.


Repayment

You can pay off your Libor rate loan or make a voluntary repayment of the amount of your choice at each rate maturity date.


Recommendation

In order to minimise rate fluctuation risks, your mortgage will ideally comprise a tranche based on the 3-month Libor rate, in addition to one or more fixed rate tranches.


Interest rates: trends and prospects (in French only)

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