The increase in the maximum interest rate for private loans in Switzerland is now effective. According to a press release from the Swiss Federal Administration, the maximum rate will be 11% from 1 January.er May 2023. This decision comes against a backdrop of general rise in interest rates. Its aim is to protect consumers against the risks associated with indebtedness. In this article, we analyze the reasons behind this increase in the maximum interest rate for private loans and its consequences for consumers and market players.
The 2 reasons for the increase in the maximum interest rate for private loans
The increase in the maximum interest rate for consumer loans in Switzerland, scheduled for May 1, 2023, is due to 2 well-known economic factors. Here are the two factors behind this decision:
1. Countering the effects of inflation :
Inflation is a determining factor for interest rates. If inflation rises, central banks tend to raise interest rates to counteract the negative effect on the economy. In the case of Switzerland unexpected acceleration in inflation suggests that the Swiss National Bank (SNB) should therefore continue to raise key rates over the coming months.
2. Stabilize the financial situation of private households :
The Swiss authorities are raising the maximum interest rate on consumer credit to reduce the risk of household overindebtedness. Higher interest rates make it more expensive for consumers to borrow, which can encourage them to reduce their indebtedness and improve their financial situation.
What does the Ordinance on the Federal Law on Consumer Credit say?
The Ordinance on the Federal Law on Consumer Credit (OLCC) is a legal instrument. It provides additional provisions and clarifications on the implementation of the Federal Consumer Credit Act (LCC). With regard to the maximum interest rate, the OLCC does not directly set the rate, but establishes the criteria and procedure for determining it.
Under article 14, paragraph 2, of the LCC, the Federal Department of Finance (DFF), in consultation with the Swiss National Bank (SNB), is responsible for setting the maximum interest rate for consumer credit. The OLCC specifies the terms of this consultation and the criteria to be taken into account in determining the maximum interest rate. From a technical point of view, the maximum interest rate for private loans is obtained by adding together the following two elements:
- The three-month compound Saron rate (SAR3MC)
- An additional 10 percentage points
The maximum rate is then rounded to the nearest whole number in accordance with commercial rules.
With real figures, it's like...
In the current context, the Saron rate is 1.41% (as at April 5, 2023), so all we need to do is add the 10 percentage points (10%) to this figure and then round off the value to obtain the maximum rate. This gives us: 1.41% + 10% = 11.41%, rounded to the nearest whole number = 11%.
The Saron rate (SAR3MC) added to 10% and then rounded off to the nearest whole number, gives the maximum interest rate for private loans in Switzerland.
Source: Ordinance on the Federal Law on Consumer Credit (OLCC)
In line with Saron's upward trend, we can therefore reasonably expect the maximum interest rate for private loans in Switzerland to rise further in the months ahead.
The consequences for consumers
The increase in the maximum interest rate for private loans in Switzerland should have several consequences for consumers. Firstly, borrowers could be more attentive to their indebtedness and repayment capacity. This could encourage them to borrow more responsibly, and thus avoid situations of over-indebtedness. Secondly, consumers could be encouraged to seek out financing solutions as attractive as possible.
When the maximum interest rate for private loans rises, history shows us the following phenomenon in consumption:
- Customers are much more careful about the terms and conditions of their private loans.
- They think twice before borrowing large sums of money
This change in behavior is perfectly in line with the objective set by the Swiss authorities. Private households are reducing their indebtedness, thereby improving their financial situation. This is also true of mortgage financing, which follows the same mechanism when interest rates rise.
Consequences for market players
Players in the Swiss credit market, such as banks and credit institutions, could also feel the effects of the increase in the maximum interest rate for private loans. Some experts anticipate a drop in applications for consumer credit due to rising borrowing costs. Credit institutions may have to adapt their offer. They will certainly have to offer more innovative financing solutions and competitive to meet consumer needs.
Rising maximum interest rates for private loans: a global trend?
The increase in the maximum interest rate for private loans in Switzerland is part of a worldwide trend observed in several countries. This development reflects the concerns of global authorities about the risks of excessive indebtedness and abusive practices on the part of certain lenders. Regulators are thus seeking to protect consumers. They promote sustainable economic growth by regulating credit conditions and encouraging responsible debt management.
Tips for coping with the rise in the maximum interest rate for private loans
To cope with this increase in the maximum interest rate for private loans in Switzerland, here are a few tips for consumers:
Compare private credit offers
Before take out a private loanIf you're looking for a mortgage, take the time to enlist the services of a broker. This will enable you to find the best solution for your financial situation and needs. A private credit intermediary will know exactly where to address your request. This way, you'll maximize your chances of obtaining a private loan without making any mistakes. classic mistakes that can lead to a refusal.
Evaluate your repayment capacity
Before taking out a loan, make sure you know your repayment capacity and the costs involved. Don't hesitate to seek professional advice to assess your financial situation. At Lica, we systematically establish a coherent budget for each of our customers before offering them a consumer credit.
Focus on innovative new solutions
With higher borrowing costs, you should consider other financing options. Our exclusive solution from cashback is a very interesting way of reducing the cost of your private credit. By making your private credit application 100% onlinecashback up to CHF 5’000.-. The principle is simple: Lica shares its commission when a customer applies for a credit on his or her own, and thus requires much less work. A fairer and more financially attractive solution for your private credit!
Our conclusion on raising the maximum interest rate for private loans
The increase in the maximum interest rate for private loans in Switzerland is designed to protect consumers. It therefore encourages responsible credit management. The consequences of this decision for consumers and market players remain to be seen. It is likely that this measure will encourage borrowers to adopt a more cautious and responsible approach to credit.
In conclusion, it is essential that borrowers become aware of this new reality and seek out the services of a professional before concluding their loan. personal loan.