Flat 35 Mortgage Rate Falls to 1.250% Lowest in History

The Japan Housing Finance Agency (JHFA) has announced that the March 2016 rate for “Flat 35” home mortgage loans is 1.250%, the lowest level in history. Flat 35 loans are one of the most widely used home mortgage products in Japan, and March is the third consecutive month where the rate has fallen.

In the wake of negative rates

The JHFA’s historically low rate announcement comes in the wake of the central bank of Japan’s decision earlier this year to introduce negative interest rates. With the move to negative rates, the BOJ is now charging lenders for holding some of their deposits, instead of paying them interest for their own funds.

Then on March 2nd, the Japanese government issued benchmark 10-year bonds with negative yields, another historic first. This means that it is essentially charging investors for lending it money. Bonds issued with negative yields return less than the principal invested if they are held to maturity. The borrower (the government) ends up earning money rather than the lender (investor).

This means the Bank of Japan is effectively funding more of the country’s debt even as aggressive monetary easing has  not raised inflation and growth.

However, monetary easing is having a clear effect on retail lending to consumers who are eyeing bottom basement mortgage rates and the planned consumption tax increase in April 2017 in deciding when to purchase their homes.

As the central bank has said that it has not ruled out further monetary easing, we may see Flat 35 mortgage rates go even lower this year.

Now back to this month’s Flat 35 announcement…

Flat 35

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 March 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 1.250% (a drop of 0.230% compared to February) and 1.880% (a drop of 0.150% compared to February). As mentioned in the lead, 1.250% is the lowest rate ever offered for Flat 35 loans.

The majority of financial institutions which offer Flat 35 loans are offering rates of about 1.250% this month for LTVs of less than 90%.

For Flat 35 loans where the loan amount is over 90%, the rate is 1.690% (a decrease of 0.230% compared to February) and 2.320% (an increase of 0.150% compared to January). The majority of financial institutions which offer Flat 35 loans are offering rates of about 1.690% 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 March 2016 rate is 1.020% to 1.650% (a decrease of 0.180% compared to February), with the majority of banks offering the lower-end 1.020% rate. In cases where the borrower is financing more than 90% of the purchase, the March rate is between 1.460% and 2.140%, with most banks offering the lower-end rate. This is a decrease of 0.230% compared to February.

Flat 50

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 March rate is between 1.780% and 2.280% (a decrease of 0.150% compared to February), with the majority of banks offering 2.030%). Where the amount being financed is more than 90%, the rate is between 2.220% and 2.720% (a decrease of 0.150%), with most banks offering 2.470%.

For comparison, according to Bankrate, the benchmark 30-year- fixed-rate mortgage in Los Angles fell to 3.88% from 4.06% in the last week of February, based on’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 JapanBasic 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: February Flat 35 Rate Drops for Second Month in a Row

Photo: Tokyo Skytree

Photo Credit: Takashi .M via Flickr