Buying a Home in Japan

What interest rate can I get for a home mortgage loan in Japan?

By Jeff Wynkoop

Rates for fixed-rate home loans in Japan are still generally very low, even though the majority of banks raised their base rate for several types of loans in June. Main street banks currently offer an average rate of 0.72% for a variable rate loan. A key point is that the gap between fixed and variable rate home loans converged last year but is diverging this year, with fixed rate loans recovering from historic loans reached in 2016.

Types of Loans Where Average Rates Rose in June

This month a majority of Japanese banks raised their base interest rates on two types of loans: (1) home mortgage loans with an initial 10-year fixed interest term/variable rate thereafter and (2) loans with a fixed interest rate over the entire term. Most of these lenders raised their base rates by 0.05%, although some banks such as Mitsubishi UFJ Trust Bank raised their rates between 0.01%-0.03%, and MUFJ Bank raised its rate on long-term fixed interest loans by 0.07%. Further, some banks such as Mitsui Sumitomo Trust Bank and Sumishin SBI Net Bank raised the base interest rate on their initial 10-year fixed interest loans only.

Rates Generally Still Very Low

Nevertheless, rates for fixed interest home loans are still generally very low. For instance, the interest rate for Mitsui Sumitomo Trust Bank’s initial 10-year fixed period home loan is 0.95% (and 0.65% in the event of refinancing). Most other banks now charge less than 1% interest in the event of refinancing this type of loan as well.

Variable Rate Loans

Main street banks (such as Mitsubishi UFJ, Mizuho, Sumitomo Mitsui, Resona,) in general offer higher interest rates than internet banks.

Variable Rate Main Street Banks

Range 0.600 ~ 1.075%
Average 0.72%

Variable Rate Internet Banks

Range 0.444 ~ 1.157%
Average 0.594%

 

The base interest rate for variable interest home loans did not change for the main Japanese banks in May, but there are special campaigns for lower initial rates, and some banks changed the maximum range of high and low rates for their variable interest rate products.

Main street banks and even most internet banks began raising the maximum interest rate on their variable interest home loans beginning in late 2016. As a result, since last year variable interest rate loans are trending to larger ranges between minimum and maximum applicable rates.

10-Year Initial Fixed Rate Loans

10-Year Initial Fixed Rate Main Street Banks

Range 0.825 ~ 1.550%
Average 1.252%

10-Year Initial Fixed Rate Internet Banks

Range 0.580 ~ 1.741%
Average 1.018%

 

In 2016, owing to the BOJ’s negative interest rate policy, there were several months where the average interest rate for this type of loan was less than 1% for the main street banks. Beginning in 2017, there has been a slight uptrend in rates for both internet banks and main street banks. Still, the rate is very low for internet banks, almost reaching the same level as full-term variable loans.

35-Year Fixed Interest Loans

35-Year Fixed Rate Main Street Banks

Range 1.090 ~ 1.630%
Average 1.308%

35-Year Fixed Rate Internet Banks

Range 0.690 ~ 2.360%
Average 1.228%

 

These types of loans were greatly affected by the BOJ’s negative interest rate policy, and in 2016 some banks lent at less than 1%. However, the market has been moving upward since September 2016, although some internet banks still offer at below 1%. It should be noted that internet banks have a much larger range of offered interest rates than main street banks.

Flat 35 Loans

For Flat 35 loans (government-sponsored fixed interest loans available from private lenders with terms of 21-35 years and loan-to-value ratios of less than 90%), the lowest base interest rate was up in June 0.03% to 1.09%. This is the second lowest interest rate level for Flat 35 loans in the last six months. For Flat 20 loans (government-sponsored fixed interest loans available from private lenders with terms of 20 years or less and loan-to-value ratios of less than 90%), the lowest base interest rate increased to 1.01%.

Discount Rates Available

It is important to know that most banks start out with offering a ‘base’ interest rate to prospective borrowers, which may then be discounted at the bank’s discretion based on a variety of factors such as creditworthiness of the borrower, etc. One way to get a discount from the base rate is to borrow during a special sales campaign. Sumishin SBI Net Bank is currently offering a special variable interest rate of 0.444% for new loans and refinancings that will expire on September 30. In addition, there are several other banks such as Sony Bank (0.499%) that are offering new home mortgage borrowers a special initial variable interest rate below 0.5%.

Editor’s Note: getting a home loan as a foreigner

As a foreigner living in Japan, it is possible to borrow from a Japanese bank to buy a home or investment property.

In general, to get a mortgage loan in Japan as a resident foreigner you need proof of income and several years of work experience at one company. For details on the residence status, income and other requirements for getting a mortgage, please see: Getting a home loan in Japan as a foreigner.

An important point to keep in mind is that many Japanese banks do not lend to foreigners. Please see this article for details on the main banks that lend to foreigners. If you are married to a national national, the easiest path may be for your spouse to apply for the mortgage under his or her name. Of course, every borrower’s financial situation is different and applications are considered on a case-by-case basis, so you should check directly with lenders to see if you qualify for a loan product.

You may also be interested in: Getting a Home Loan as a Foreigner in Japan

Top photo: Kita Ward Central Library Building, Tokyo by Takayuki Miki via Flickr