Sony Bank will reduce their variable home loan interest rates to 0.499% from April 2016. With the exception of banks offering campaign discounts, this makes Sony the first bank to reduce rates below the 0.5% range. After the Bank of Japan introduced negative interest rates in February, retail banks have been lowering interest rates offered to consumers. Until recently, banks were only reducing interest rates on fixed-rate loans, but it is now spreading to variable rate plans as well.

Sony’s variable interest rate in April will represent a 0.02 point decrease from current rates in March. The interest rate is the prime rate and is limited to borrowers that meet the bank’s strict requirements, including working for a large company, and having a minimum number of years at their current job. It is limited to home loans only (not investment loans), and loan-to-values must be below 90%. Variable rates are adjusted twice a year – once in May and once in November, which means existing borrowers may also benefit from lower interest rates in a few months time.

While fixed home loan interest rates tend to follow movements of the 10-year long-term government bond rate, which has reached record lows in recent months, variable interest rates follow short-term lending rates which have not changed. Because of this, major banks, such as Tokyo-Mitsubishi UFJ, have left their variable rates at the 0.6% range.

Home loan interest rates in Japan:
Bank: Type: Interest Rate: Start Date:
Sony Bank Variable 0.499% April 2016
Aeon Bank Fixed (3-year) 0.38% January 2016
Sumitomo Mitsui Trust Bank Fixed (10-year) 0.50% March 2016
Tokyo-Mitsubishi UFJ Fixed (10-year) 0.80% March 2016

Source: The Tokyo Shimbun, March 20, 2016.

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