What you need to know about the base rate

Alain, what is the base rate?
In a nutshell, the average interest rate that is reset four times a year. It is used to determine mortgage interest rates. The base rate therefore plays an important role for most of us. Since June 2023, it has been 1.5%. It is set by the Federal Office for Housing (Bundesamt für Wohnungswesen, BWO).

How does the base rate affect everyday lives?
It is linked to rents. This means that net rents generally rise when the base rate increases, and vice versa. By the way, over the past 15 years, the base rate has fallen consistently. June 2023 is the first time it has gone up.

Is the base rate going to increase further?
All of the forecasts point to a clear: Yes! This also means that most rents will go up. But a higher base rate isn’t the only reason for an increase in the rent. Inflation or general cost rises are other reasons for this. Cost rises are when home owners have to spend more on running their properties – on tax, insurance premiums and maintenance costs, for example.

Inflation is a hot topic. What is it exactly?
In very simple terms, inflation is when you can buy fewer of the same goods for the same outlay as you could prior to inflation. Money therefore loses value – and this is what’s currently happening. 

How much of that can be passed on to tenants?
A maximum of 40% of inflation can be incorporated into rents. The general assumption is that around 60% of a property is financed by bank loans and 40% by equity. For example: if prices increase by 10% due to inflation, rents can only rise by 4%.

Tips: how to protect yourself against a rent increase

Check the formal prerequisites 

A rent increase must be communicated and justified using the official cantonal form. If you live in the Canton of Zurich, your landlord will have to use the official form issued by the Canton of Zurich.

What’s important to bear in mind is that everyone who signed the tenancy agreement as a landlord must also sign this form. Otherwise, the increase is not valid. Nevertheless, your landlord can still apply a rent increase as of your next notice date – using the correct procedure this time.

When your landlord notifies you of a rent increase, they are also legally required to give you 10 days to consider the increase. This means you will be able to terminate your tenancy agreement within the notice period if you are not happy with the increase. This is why the landlord has to provide you with the form at least 10 days before the next possible termination date. More details are available in your tenancy agreement. 

Checking the increase using a rent calculator

If the formal perquisites have been met, you should use a rent calculator to check whether the increase has been calculated correctly. To do this, you will need your tenancy agreement and – if the rent has already been increased – the relevant letter.

If you also want to check inflation, the best way to do this is to use the national consumer price index.

Contesting rent increases within 30 days

If you spot any errors, you can contest the rent increase within 30 days of receipt. You must do this by writing to the relevant arbitration authority by registered mail. Otherwise, the increase will be legally valid. If you are unsure which arbitration authority is responsible for your area, you can enter your post code or place name. 

By the way, if you fail to collect the registered letter regarding your rent increase from the post office, it will be deemed to have been delivered on the final day of the collection period. 

Need help from your legal protection insurance?

If you have personal legal protection insurance with Fortuna and want to register your case in writing, you will need:

• your policy number
• a copy of your rent increase letter (including any attachments)
• a copy of your tenancy agreement
• any rent adjustments since the start of your rental contract

If you have any questions, please do not hesitate to contact our legal advice hotline:

(Tel. 058 472 72 00, Mon–Thu 8.00 am to 5.30 pm and Fri 8.00 am to 5.00 pm)