The official “Flat 35” home mortgage rate for June rose to 1.100%, the first time that the rate has risen in eight months, as announced by the Japan Housing Finance Agency (JHFA). Flat 35 loans are among the most widely used home mortgage products in Japan.
As we reported last month, the JHFA had allowed the official Flat 35 rate for these home buyer-friendly mortgages to fall for five consecutive months (to May 2016), tracking the Bank of Japan’s negative interest rate policy.
The Nikkei Asian Review has reported that here has been downward pressure on rates for small business loans and home mortgages because these products offer relatively large profit margins for banks. Japanese media has also reported that the effect of falling mortgage rates has goosed the market for home re-financing loans.
The JHFA had allowed the official May Flat 35 to decrease despite the BOJ’s decision to keep rates unchanged in its April 27th policy meeting.
This month’s decision to allow the Flat 35 rate to increase, albeit slightly, is a surprise given the BOJ’s official line that it still has many tools available to reflate the economy.
Flat 35 loans are fixed interest loans with terms of 35 years, offered by a wide variety of Japanese banks, and securitized by the JHFA. The JHFA is a Japanese public corporation similar to Fannie Mae in the US or the Canada Mortgage and Housing Corporation.
For June 2016, the interest rate for Flat 35 loans where the term is 21 years or above and less than 35 years, and where the loan amount is 90% or less than the price of the property, is between 1.100% (an increase of 0.020% compared to May) and 1.710% (a drop of 0.060% compared to May).
The majority of financial institutions which offer Flat 35 loans are offering rates of about 1.100% this month for LTVs of less than 90%.
LTVs Greater Than 90%
For Flat 35 loans where the loan amount is over 90%, the rate is 1.540% (an increase of 0.020% compared to May) and 2.150% (a decrease of 0.060% compared to May).
The majority of financial institutions which offer Flat 35 loans are offering rates of about 1.540% this month for LTVs of more than 90%.
Rate for 20-Year Payback Period
For loans where the payback period is 20 years or less and where the loan amount is 90% or less, the June 2016 rate is 0.990% (up 0.0300% v. May) to 1.600% (down 0.050% v. May), with the majority of banks offering the lower-end 0.990% rate. In cases where the borrower is financing more than 90% of the purchase, the June rate is between 1.430% (up 0.030% v. May) and 2.040% (down 0.050%), with most banks offering the lower-end rate.
For Flat 50 loans where the term is 36 years or more and 50 years or less, and where the amount being financed is 90% or less, the June rate is between 1.690% and 2.190% (a significant decrease of 0.150% compared to May), with the majority of banks offering 1.940%. Where the amount being financed is more than 90%, the rate is between 2.130% and 2.630% (a decrease of 0.150%), with most banks offering 2.380%.
For comparison, according to Bankrate, the benchmark 30-year- fixed-rate mortgage in Los Angles rose to 4.00% from 3.83% in the last week of May, based on Bankrate.com’s national survey of large lenders.
Qualifying for a Mortgage as a Foreigner
For more information on qualifying for a home mortgage loan as a foreigner in Japan, please see our articles on Home Mortgage Loans for Foreigners in Japan, Basic Requirements for Getting a Mortgage as a Foreigner in Japan, and this Home Buyer Profile.
Many Japanese banks do require non-Japanese home loan applicants to be married to a Japanese national or to have permanent residency (PR), but there are some banks that will lend to foreign nationals who have a working visa and a certain minimum annual income level, usually about 7 million yen, as explained in this article on Investing in Residential Apartment Buildings in Japan.
For last month’s post on Flat 35 rates, please see: May Flat 35 Rate Hits Historic Low, Again