The Japan Finance Housing Agency (JHFA) has announced the interest rate for Flat 35 home loans for May, with a lowest available rate of 1.480% per annum, the fourth consecutive month in which the Flat 35 rate has risen. In April, the lowest available rate was 1.440%. Flat 35 loans are among the most widely used home mortgage products in Japan.

Variable interest rates in Japan are even more attractive and continue to remain at record lows, despite a slightly inflationary consumer price environment. Au Jibun Bank (a joint-venture of KDDI and Mitsubishi UFJ Bank), for example, is currently offering a variable rate mortgage of 0.440%, including fees.

For comparison, according to Bankrate‘s survey of national large lenders in the United States, the 30-year fixed-rate mortgage averaged 5.54% as of May 9, 2022, up 13 basis points from a week ago.

A difference of a few percentage points in the mortgage rate equates to significant cost savings in the total amount that you have to repay.

Here is a rough simulation of the difference in the amount of interest that has to be repaid for a $300,000USD loan to be repaid over a 30-year period, with no early repayment.

Interest rate Total amount to be repaid with interest Total interest to be repaid
5.54% 615,924.00 315,924.00
1.44% 369,630.00 69,630.00
Difference 246,294.00

May 2022 Flat 35 Fixed Rates

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 May 2022, 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 1.480% and 2.540%. The most commonly offered rate for this type of loan is 1.480%.

LTVs Greater Than 90%

For Flat 35 loans where the loan amount is over 90%, the rate is between 1.740% and 2.800%. Financial institutions offering this type of loan are most commonly offering a rate of 1.740%.

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 May 2022 rate is between 1.350% and 2.410%, with the most commonly offered rate being 1.350%. In cases where the borrower is financing more than 90% of the purchase, the May rate is between 1.610% and 2.670%, with most banks offering the lower-end rate.

LTVs Greater Than 90%

For loans where the payback period is 20 years or less and where the loan amount is over 90%, the rate is between 1.610% and 2.670%. Financial institutions offering this type of loan are most commonly offering a rate of 1.610%.

Ultra-loose monetary policy seems likely to continue

With inflation modest compared with other nations and the economy still below pre-pandemic levels, the Bank of Japan has indicated that it is not planning to tweak its ultra-loose monetary policy or to modify a pledge to keep rates at current or lower levels.

Despite Japan’s ultra-low interest rate environment, Flat 35 rates have increased in the last four months. But compared to other countries, mortgage rates in Japan are still very low.

Loan Period

For financial institutions offering Flat 35 Rates: Lowest
Available Flat 35 rate by month
15 Year to 20 Year Re-Payment 21 year to 35 year Re-Payment
May 2022 1.35% 1.48%
April 2022 1.31% 1.44%
March 2022 1.31% 1.43%
February 2022 1.23% 1.35%
January 2022 1.18% 1.30%

The interest rate differential between the US 10-Year T-bill (about 3.142% as of May 10th) and Japanese 10-Year Treasury bonds (about 0.245%) is the main reason that the yen has weakened so much against the dollar this year (at about 130 JPY to one USD, a twenty-year low), but the Bank of Japan has said that a weak yen is positive for the economy and that commodity inflation will not prompt the BOJ to change its monetary policy. At the same time, the U.S. central bank has indicated that it will hike interest rates by 3 percentage points this year.

A weaker yen has made Japanese real estate much more attractive for foreign buyers with dollars and euros to exchange. For more on this, please see: 7 reasons why foreigners are interested in buying a home in Japan, especially now.

For more information on qualifying for a home mortgage loan as a foreigner in Japan, please see this article: Which Japanese banks lend to foreigners to buy a home or investment property. As of this writing, Prestia SMBC Trust Bank, a bank that offers home loans to foreigners with variable rates as low as 0.47% per annum and 10-year fixed rate loans as low as 0.90%.

We also cover this topic in-depth at our free webinars on how to buy a home in Japan. Our webinars go over how to buy a home and which Japanese banks lend to foreigners.

Many Japanese banks require non-Japanese home loan applicants to be married to a Japanese national or to have permanent residency (PR), but there some banks do lend to foreign nationals who have a working visa and a certain minimum annual income level, usually at least about ¥5,000,000.

Bilingual Agents

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