Adjustable-rate mortgage
Flexible financing with no fixed term

The variable-rate mortgage is the classic form of with a flexible interest rate. It was the standard model in Switzerland for a long time, but is now increasingly being replaced by and .

Nevertheless, it can be useful in certain situations—provided you are aware of the pros and cons.

Adjustable-rate mortgage

Definition
Adjustable-rate Mortgage

A variable-rate Mortgage has

  • No fixed term
  • No long-term fixed interest rate
  • Flexible cancellation options

The interest rate is set by the mortgage lender and can be adjusted at any time. Adjustable-rate mortgages typically have notice periods of 3 to 6 months, offering a high degree of flexibility when making changes to the contract.

How it works
How does a variable-rate Mortgage work?

Unlike SARON mortgages, variable-rate mortgages are not based on a transparent reference rate. With variable-rate mortgages, however, the bank sets the interest rate on a case-by-case basis, adjustments occur irregularly, and the decisions are often not fully transparent—the can ultimately set the interest rate at its discretion.

Important
In practice, interest rate changes are often passed on with a delay—especially when rates are falling. As a result, interest rates are often more than 1 percentage point higher than those for SARON mortgages.

Comparison

Advantages and disadvantages
compared to other models

Advantages of a variable-rate Mortgage

  • High flexibility
    Main advantage

    Since the Mortgage can be terminated at any time with short notice, it is ideal for a planned real estate sale, short-term financing solutions, or transitional periods.

  • Simple structure

    No complex models or calculations—the adjustable-rate Mortgage is easy to understand.

  • Opportunity to benefit from falling interest rates

    When the provider lowers interest rates, you benefit directly. However, this often happens with a long delay.

Disadvantages of a variable-rate Mortgage

  • High interest rates
    Main disadvantage

    Adjustable-rate mortgages are generally among the most expensive and often have interest rates significantly higher than those of SARON mortgages or short-term fixed-rate mortgages.

    Although they are similar in nature to the SARON Mortgage, variable-rate mortgages cost significantly more.

  • Low transparency

    The interest rate is set by the provider and is not directly linked to a market rate, which makes it difficult to compare different providers and understand how interest rates are determined.

    You are, so to speak, at the mercy of the provider

  • Uncertain cost trends

    Interest rates can rise at any time—with no clear forecast. This makes it difficult to plan with any certainty.

  • Delayed interest rate adjustments

    Falling interest rates are often passed on more slowly than rising ones. This is a major disadvantage for borrowers.

Interest Rate Trends
Market Mechanisms for Adjustable-Rate Mortgages

An important point: While interest rates are based on market conditions, they are not automatically adjusted.

This means

  • rising interest rates → are often passed on quickly
  • falling interest rates → are often passed on with a delay or not at all

This asymmetric alignment is a major disadvantage for customers.

Visualization
Interest rates are subject to change at any time

FAQ

Frequently Asked Questions
Answers about variable-rate mortgages

Interest rates are generally significantly higher than for SARON or Fixed-rate mortgages. For this reason, variable-rate mortgages are often considered a more expensive financing solution. The interest rate premium compared to a SARON mortgage is usually between 1 and 1.5 percentage points.

Interest rates are not adjusted automatically but are set by the provider. Adjustments occur irregularly and are often not transparent. When interest rates rise, they are usually adjusted more quickly than when they fall.

The SARON mortgage is very similar in terms of its features. Some providers offer SARON mortgages with very short terms and notice periods. In many cases, this is more advantageous than more expensive variable-rate mortgages. Short-term fixed-rate mortgages are also a good alternative, depending on your individual circumstances.

Yes, usually with a notice period of 3 to 6 months. That makes it particularly flexible.

Variable-rate mortgages are a niche product today, but they can make sense.

Typical use cases

  • short-term bridge financing (e.g., until the property is sold)
  • very small mortgage amounts
  • maximum flexibility required
  • uncertain planning situation

Conclusion
In most other cases, there are better alternatives.

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