Reference interest rate holds at 1.25%: Check your rent situation now

How does the reference interest rate work?

The mortgage reference interest rate is published quarterly by the Federal Office for Housing, based on the average of all outstanding mortgage loans held by Swiss banks. It is the central instrument for adjusting rents in ongoing tenancy agreements: when the rate falls, tenants can request a rent reduction; when it rises, landlords may increase rents. Crucially, these adjustments are not automatic — both parties must act themselves.

What does 1.25% mean for you?

If your tenancy was concluded when the reference rate was higher — for example at 1.50% or 2.00% — you may be entitled to a rent reduction. The general rule: each 0.25 percentage point drop in the reference rate gives rise to a reduction entitlement of approximately 2.91%. This right does not arise automatically — tenants must assert it in writing, citing the current reference rate and the rate that applied when the lease was signed.

As a landlord, verify that any previous rate decrease was correctly passed on and that rent adjustments are properly documented. Looking further ahead — likely from mid-2027 — average mortgage rates may edge upward and push the reference rate back to 1.50%, at which point rent increases would become permissible. Being prepared today avoids unwelcome surprises later.