SARON
SARON (Swiss Average Rate Overnight) is the Swiss franc reference interest rate based on the secured overnight money market. It replaced CHF LIBOR and is the benchmark used to price variable-rate Swiss mortgages.
In detail
A SARON mortgage's interest rate is recalculated each period from the compounded SARON plus a fixed lender margin. Payments therefore move with market rates instead of staying fixed for years.
Compared with a fixed-rate mortgage, SARON has historically been cheaper on average but exposes the borrower to rate increases, which is the core trade-off when choosing a Swiss mortgage.
- Calculated from the secured Swiss franc overnight market; replaced CHF LIBOR in 2021.
- SARON mortgage rate = compounded SARON + fixed lender margin.
- Cheaper on average historically, but payments vary with market rates.
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