From the beginning of this month, Japan’s main banks have started to increase interest rates offered on home loans. This is due to the worldwide shift towards reducing monetary easing measures that have been in effect since the start of the pandemic. On January 31, Japan’s long-term interest rate reached 0.185%, the highest level in six years.

Mitsubishi UFJ and Sumitomo Mitsui Banking Corporation have increased the base rate on their 10-year fixed-rate home loans by 0.1 percentage points. Mizuho Bank increased its rate by 0.05 points. Prime rates on 10-year fixed-rate mortgages at these three main banks currently range from 0.90 ~ 1.30%, while the base rates vary from 2.80 ~ 3.49%.

The current small change in rates is unlikely to have a noticeable impact on the housing market, with incentives such as the home loan tax deduction returning 0.7 ~ 1% of the remaining mortgage balance to borrowers for the first 10 ~ 13 years of the loan. Fixed-term rates are also still at historic lows despite this month’s increase. 

The interest on fixed-rate mortgages follows movements in the bond market, particularly the 10-year yield on government bonds. If those yields rise, this tends to result in an increase in interest rates. 

In 1990 and 1991, home loan interest rates in Japan were around 8%. In the US, they were up to 10% in 1990, and in Australia they had reached a record high of 17%. Nowadays, fixed-rate mortgages in Japan can be found under the 1% range and variable rate mortgages for as low as 0.4 ~ 0.5% for eligible borrowers. 

NHK, February 1, 2022.
Yukan Fuji, February 8, 2022.
Abema Times, February 3, 2022.