Home loan rates to rise in June

Banks are reporting a surge in inquiries from potential borrowers as interest rates are expected to rise next month. Customers are desperate to lock in mortgages at current rates, but it may already be too late for some.

Next month, Sony Bank will increase their 10-year fixed-rate home loan from 1.406% to 1.692%. As their home loan approvals typically take 1.5 months to process, any applications received now will be approved at the prevailing rates in July. Other major banks such as MUFJ and Mizuho may increase their 10-year fixed-rates to 1.50% next month, but they could go as high as 1.60%.

Japanese mortgage rates are determined based on the long-term interest rate. Following the Bank of Japan’s monetary easing at the end of April, long-term rates have increased from 0.6% to almost 0.9%.

Over the first three weeks of May, inquiries to the call centre at the Bank of Tokyo-Mitsubishi UFJ were up 50% compared to the same time last year. In April, home builder Sekisui House received 23% more orders than they did in April 2012, and are expecting to see continued strong demand this month.

According to financial planner Katsumi Miyazaki, the typical repayments on a 30 million Yen 30-year mortgage with a 10-year fixed-term interest rate of 1.4% would be 102,102 Yen a month. If the interest rate was 1.7%, those repayments would be 106,439 Yen a month. This is an extra 4,337 Yen a month, or 520,440 Yen over 10 years. Even with an increase to 1.7%, Miyazaki says that it is still a good time to buy while interest rates are in the 1% range.

The Tokyo Shimbun, May 29, 2013.
The Asahi Shimbun, May 30, 2013.

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