As anticipated, banks have increased the rates on 10-year fixed-rate mortgages this month. This is in response to the Bank of Japan expanding the trade band for 10-year government bond yields to a range of -0.5% and 0.5%.

All five of Japan’s mega-banks have announced planned rate rises for new loan contracts executed in January. The rate rises range from 0.1 ~ 0.34 points. Variable rates, chosen by over 70% of home loan borrowers, will not change.

Prime rates on 10-year fixed-rate home loans:

  • Mitsubishi UFJ: 1.05% 
  • Sumitomo Mitsui Bank: 1.14%
  • Sumitomo Mitsui Trust Bank: 1.39%
  • Resona Bank: 1.18%
  • Mizuho Bank: 1.40%

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 0.420% as of December 30, 2022, up from a 0.252% yield as of November 1.

The Flat 35 home loan offered by the Japan Housing Finance Agency, where the interest rate is fixed for the 35-year term of the loan, saw a 0.03 point increase for the lowest interest rate on offer in January. The interest rate for loans with a loan-to-value of 90% and below was between 1.68% ~ 3.27%. In December it ranged from 1.65% ~ 3.00%. The widening of the trading band for bonds was not expected to have an immediate or large effect on loan interest rates as the Agency makes a decision to revise rates after several months of deliberations.

Sources: 
TBS, December 30, 2022.
FNN, December 30, 2022.

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