From a Libor to a SARON mortgage product
Since the SARON is an overnight rate and applies to the interest period overnight, SIX calculates the compounded SARON, which is used as the reference interest rate for money market mortgages, from the average of the daily compounded SARON rates. This is done retrospectively and from the customer’s point of view is the big difference to financing with Libor. Because the current interest rate for the SARON mortgage debtor is set at the end of the interest period – similar to an electricity bill, in which the actual consumption is only billed afterwards. Good to know for mortgage customers: In the past, the compounded SARON was close to the 3-month Libor and was even lower and more stable in times of market turbulence.
With the UBS SARON Hypothek and the UBS SARON Flex Hypothek two perpetual variable interest products. With both, you have the option of protecting yourself against rising interest rates by changing all or part of a multi-year UBS fixed-rate mortgage within a few working days. With the Flex variant, the borrower also has the option to repay the loan amount flexibly four times a year.
Anyone who has a UBS Libor mortgage has the option of switching to a UBS SARON mortgage, UBS SARON Flex mortgage or a UBS fixed-rate mortgage free of charge. Otherwise, the underlying reference interest rate will be switched from Libor to Compounded SARON in 2022. UBS will inform customers with a Libor mortgage in good time.
Both Libor and SARON are short-term money market rates and have been negative for a long time. In view of the low interest rates in the euro zone and the still overvalued Swiss franc, this is likely to remain so until the end of 2021. So reasons enough to welcome the newcomer.