Rent adjustments for residential premises due to an increase in the reference interest rate – limits of what is permissible

Author: Vivien Keiser

The rent is based on the reference interest rate
Under Swiss tenancy law, the rent has been based on the mortgage reference interest rate since 2008. The reference interest rate, which is based on the average mortgage interest rate for Swiss franc-denominated domestic mortgages held by Swiss banks, is levied quarterly and replaces the previously applicable cantonal interest rate for variable mortgages. The basic idea behind basing rents on the reference interest rate was to harmonize rent levels across the country.

When the reference interest rate was introduced in 2008, it stood at 3.5%, and since then it has only known one direction, namely downward. Since March 2020, the reference interest rate has been 1.25%. However, it can be assumed that the reference interest rate will be raised for the first time from summer 2023. The current reference interest rate, but also its development, is published on the website of the Federal Office of Housing(link). If the reference interest rate is below 5% overall, the increase of the reference interest rate by 0.25% each time will justify a maximum increase of the rent by 3%. This means that if the reference rate increases from 1.25% to 1.5%, the rent could be increased by 3% and again if the reference rate increases from 1.5% to 1.75%.