Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.
While Americans have grappled with elevated mortgage rates and low inventory for years now, Japanese citizens have lived with the mirror image of these conditions for decades. The country’s longstanding so-called “free” mortgages may not last much longer, however, according to a New York Times report, which may come as a shock to consumers.
Japan’s benchmark interest rates have sat around 0 percent since the mid-1990s, so homebuyers have become accustomed to paying about 0.3 percent to 0.4 percent on floating rate mortgages or slightly over 1 percent for long-term fixed-rate mortgages. By contrast, Americans are now paying fixed rates on 30-year mortgages that are hovering around 6.35 percent.
As many of the country’s large companies gave substantial raises to employees recently and consumer spending has risen in turn, the Bank of Japan has decided to hike rates up — it did so in March and July, and has indicated that it will continue.
About 75 percent of the country’s personal mortgages are floating-rate loans, according to a Bloomberg story in The Japan Times. Therefore, many homeowners will feel rate increases hit their pockets in the way of increased monthly home payments.
The country’s home prices have also remained low because of oversupply in the face of a shrinking population. In the wake of a construction boom that began in the 1990s following a real estate and stock market bubble burst, Tokyo’s housing stock nearly tripled from the early 1960s to 2013. Japan has also become known for its growing number of properties, particularly in rural areas, that are being abandoned as residents age out of them or pass away with no heirs to give the property to.
During this period of low rates, banks have competed for loan business, spurring some online banks to offer rates as low as 0.27 percent, according to The Japan Times. The government has also kept rates low to try and spur inflation in what has been a deflationary economy for decades.
After its early ’90s bubble burst, Japanese residents widely adopted a distaste for loans, which has caused many to curb other purchases in order to pay back loans as quickly as possible, according to The New York Times story.
