Reference Interest Rate Down to 1.25 Percent: What Tenants and Landlords Need to Know Now
In September 2025, the Federal Office for Housing (BWO) lowered the mortgage reference interest rate to 1.25 percent. For roughly 2.3 million tenants in Switzerland, this is a significant change. Landlords also need to actively assess this step — it affects not only rent adjustments, but also the valuation of investment properties.
What the Reference Interest Rate Is
The mortgage reference interest rate is set quarterly by the BWO based on the average interest rate of domestic mortgage claims across all banks. It is the key figure for the legally prescribed rent adjustment mechanism in Switzerland: when the reference rate rises, landlords may charge higher rents — when it falls, tenants are entitled to a reduction.
Claiming a Rent Reduction — How It Works
Tenants do not have an automatic right to a reduction. They must actively assert the reduction with the landlord in writing, generally as of the next ordinary termination date. What matters is the reference interest rate that applied at the last rent-setting — not the current one. So anyone who has lived in the same apartment at the same rent for years may, depending on their starting position, be entitled to a noticeable reduction.
What the Reduction Means for Landlords
The reduction in the reference interest rate lowers rental income — provided tenants assert their claim. Landlords should not treat this step as a loss, but as an occasion to review their tenancies thoroughly: are inflation adjustments correctly recorded? Are ancillary costs billed transparently? Have any value-preserving investments been properly documented for rent purposes?
Impact on Investment Properties
Falling rents mathematically affect the income value of an investment property. Anyone currently selling or having a multi-family building valued should factor expected rent adjustments into the valuation. A current, objectified market analysis is the basis for any serious sale.
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