Forward rate

Agreement to lock in a future mortgage rate in advance.

A forward rate is an agreement between the borrower and the bank to lock in a mortgage rate for a future date. This instrument is primarily used for mortgage renewals.

In Switzerland, it is generally possible to enter a forward agreement up to 12 to 24 months before the current mortgage expires. The bank charges a forward premium (rate supplement) to cover the risk of rate changes during the waiting period.

The forward rate offers planning security: if rates rise before maturity, the borrower is protected. Conversely, if rates fall, the borrower remains committed to the agreed rate.

This tool is particularly relevant in periods of low rates or high uncertainty about market trends.

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