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🇰🇷 South Korea /Economy & Trade

Japan moves from zero rates to an era of interest, leaving mortgage borrowers struggling

From Hankyoreh · () Korean

Translated from Korean and summarized by DistantNews. Read the original for the full story.

At a glance

News Documents & data Ongoing story
  • Japan’s long-term fixed mortgage rate reached 3.46%, nearly doubling from the high-1% range seen late last year, while variable rates are also rising.
  • The Bank of Japan ended negative rates in March 2024 and has since raised its policy rate in 0.25-point steps, with another increase possible this month.
  • Banks are reducing their emphasis on mortgages and expanding corporate lending as higher rates improve returns and increase concerns about household borrowers’ repayment risks.

Japan’s long-promised “era of interest rates” is becoming a burden for homeowners who borrowed heavily when money was almost free. A 60-year-old man who bought a 42 million yen home with a variable-rate mortgage 15 years ago now pays more than 100,000 yen a month, after his repayments rose with interest rates. Retired and struggling to find work after turning 60, he told Kansai TV he was considering taking a part-time job.

The change is visible in new mortgage pricing. On Dec. 8, the Flat 35 website operated by the Japan Housing Finance Agency showed that the most common rate offered for 21- to 35-year fixed-rate loans was 3.46% for loans covering up to 90% of a property’s value. The rate had remained in the high-1% range as recently as the end of last year, but has nearly doubled in little more than a year.

I had thought about getting a part-time job after retirement, but it is not easy to find work after turning 60.

· Unnamed 60-year-old male borrowerHe described the pressure caused by higher repayments on his variable-rate mortgage.

Variable-rate borrowers are also being exposed to higher costs. Sumitomo Mitsui Banking Corp., one of Japan’s three largest banks, listed its preferential variable rate for new mortgages at 1.525% this month. That compares with around 0.5% just two years ago, when rates at that level were effectively normal in Japan.

The long period of ultra-low interest rates is ending, and a situation is emerging in which past assumptions about interest rates no longer apply.

· Kansai TVThe broadcaster described the broader impact of rising mortgage rates on household finances.

The Bank of Japan ended the negative-rate policy introduced in 2016 in March 2024. Since then, it has continued raising rates by 0.25 percentage points at intervals of roughly six months. The central bank’s policy rate now stands at 1.0%, and another quarter-point increase is being discussed for this month’s policy meeting.

Commercial banks are changing strategy as they follow the central bank. During the low-rate period, they often used mortgages to attract customers who might also buy credit cards or insurance. Now, with corporate lending rates rising, major banks are stepping back from offering broad mortgage loans at low rates. The Nikkei said their mortgage strategy had reached a turning point, while Kansai TV warned that old assumptions about interest rates no longer apply.

Major banks are beginning to distance themselves from competition over mortgages that offered broad lending at low rates.

· NikkeiThe newspaper described banks’ shift toward corporate lending as business-loan rates rise.
About this summary

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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