Four of Japan’s five mega-banks have reduced the premium interest rate on new home loans offered in June. The rate reductions apply to 10-year fixed rate mortgages.

This is in response to lessening upwards pressure on the long-term interest rate. Mitsubishi UFJ and Mizuho Bank will reduce their rates by 0.05 points, Sumitomo Mitsui Banking Corporation by 0.06 points, and Sumitomo Mitsui Trust Bank by 0.10 points.

The premium 10-year fixed rates are:

  • Mitsubishi UFJ: 0.99%
  • Mizuho Bank: 1.10%
  • Sumitomo Mitsui Banking Corporation: 0.99%
  • Sumitomo Mitsui Trust Bank: 0.80%
  • Resona Bank: 1.00%

The interest on fixed-rate mortgages follows movements in the domestic bond market, particularly the 10-year yield on government bonds. If those yields rise, this tends to result in an increase in interest rates. The 10-year yield was 0.236% as of June 1, 2022. In August 2019 it was -0.284%. The Bank of Japan is maintaining a stimulus program to keep rates low, targeting a 0.25% yield on 10-year government bonds.

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%.

Source: Jiji Press, May 31, 2022.