After cutting the interest rate in March from 1.75 to 1.50 percent, Switzerland’s central bank slashed the rate by another quarter percent to bring it down to 1.25. 

The law of economics, at least in Switzerland, dictates that when the rates are cut, rents will fall as well.

That is because most rents in Switzerland are based on the so-called reference interest rate, which is set by the Federal Housing Administration.

It is an average of all interest paid on mortgages in Switzerland. These, in turn, are based on the SNB’s key interest rate.

As a rule, if the reference rate falls by 0.25 percent — as is the case now —tenants are generally entitled to lower rents.

According to Freddy Hasenmaile, chief economist at Raiffeisen Bank, “the bottom line is that this should slow the growth of existing rents somewhat.” 

When will this rent reduction go into effect?

Unfortunately, this doesn’t happen overnight.

Since long-term fixed-rate mortgages are also included in the calculation, it takes time for the reference interest rate to fall.

When that happens however — likely within the next few months — tenants will be entitled to rent reductions, provided the landlord had raised their rents when reference rates increased in the past.

Be proactive

Ideally, when the rates fall and tenants are entitled to have their rents lowered, the landlord should do this automatically.

But that is not always the case.

That is why it behooves tenants to take this matter into their own hands.

In all, an estimated 2.2 million households in Switzerland can apply for a rent reduction.

To make this process easier, the Swiss Tenants Association has prepared a sample form which can be filled out and sent to the landlard or management company. 

Can the landlord refuse your request for rent reduction, despite lower interest rates?

Yes.

According to Comparis consumer platform, the landlord could refuse to reduce your rent on grounds including value-enhancing works done to the property, higher operating costs due to inflation, or general increases in running expenses.

He or she can also say (and must prove) that the current rents are within the range of other comparable properties in the area.

Can you dispute this decision?

If you have valid reasons to do so, then yes.

For instance, landlords are allowed to  charge a maximum of 0.5 percent of the net rent to cover increases in operating and maintenance costs. 

Also by law, property owners may only pass on to tenants up to 40 percent of the inflation accumulated since the last rent adjustment.

If you have prove that these figures are exceeded, then you can file a complaint with your local conciliation authority. 

READ ALSO: How to solve a dispute with your Swiss landlord