Homebuyers Grow Anxious as Japan's Mortgage Rates Rise

Japanese homebuyers are feeling increasing uncertainty due to rising mortgage costs, as interest rates have surged to a level not seen in about 30 years. The yield on the benchmark 10-year government bond briefly exceeded 3% last week, marking a significant shift from the ultra-low interest rate environment that has long dominated Japan. This change is impacting not just financial markets, but also mortgages, household budgets, savings, and corporate activity.

During Japan's bubble economy 40 years ago, interest rates were so high that simply depositing money in a bank could generate substantial returns. However, rates declined after the bubble collapsed and the economy weakened, leading to an extended period of extremely low borrowing costs. Recently, long-term interest rates and the Bank of Japan's policy rate have increased, bringing the country into a period of rising rates.

This shift has created concern among people considering purchasing homes as property prices have also risen sharply. At a housing exhibition site, a couple in their 20s expressed both excitement about buying a home and anxiety over financing. They mentioned that choosing a mortgage has been difficult because they want to find the bank offering the lowest possible interest rate.

Mortgage comparison services have seen a surge in inquiries as interest rates rise, with the number of calls reaching about two to 2.5 times the usual level. Borrowers are debating whether to choose fixed-rate or variable-rate mortgages, with variable rates currently around 1% to slightly above 1%, while fixed rates are around 3.2% to 3.3%. The specialist recommended variable rates under current conditions but cautioned that borrowers should prepare for the risk of further rate increases.

The rising rates are also affecting those already in the middle of their mortgage repayment periods. A 61-year-old man named Tanaka bought a house 15 years ago for 42 million yen. His monthly mortgage payment, initially about 94,000 yen under a variable-rate loan, has increased by more than 10,000 yen in recent years, raising his annual burden by roughly 180,000 yen.

Tanaka has considered options such as a leaseback arrangement, where he would sell his home but continue living there while paying rent, or restructuring his mortgage to pay only interest for one year while extending the repayment period and beginning to receive his pension early.