Floating rate loan interest just went up!

[Tsumitate Wrestler]

FWIW here is what ChatGPT gave me… seems plausible, would be great if anyone who reads Japanese better than me can check.

Yes, Japanese floating rate mortgages often include a feature called the “fixed payment system” (元利均等返済方式, genri kintō hensai hōshiki), which ensures that the monthly repayment amount remains constant over a specified period, even if the interest rate changes. However, this comes with important caveats:

Key Features:
1. Constant Monthly Payment:
• The monthly repayment amount remains unchanged for a certain period (e.g., 5 or 10 years), providing borrowers with stability.
2. Interest Adjustment Impact:
• If the interest rate rises, a larger portion of the fixed payment goes toward paying interest, and the portion going toward principal repayment decreases.
• Conversely, if the interest rate decreases, more of the fixed payment goes toward reducing the principal.
3. Payment Cap:
• Many loans have a cap on how much the monthly repayment can increase after the fixed period ends, typically around 125% of the original payment.
4. Extended Loan Term Risk:
• If interest rates rise significantly, the fixed payments may not cover the full interest owed. In such cases, the unpaid interest is added to the principal balance, potentially extending the loan term beyond the original schedule.

This feature is designed to protect borrowers from sudden increases in monthly payments due to rate fluctuations while maintaining predictability in household budgets. However, borrowers should carefully evaluate potential long-term costs if rates rise significantly.

It is known as the 5 year, 125% rule. {住宅ローン変動金利の5年ルールと125％ルールと}

It is offered by most banks that offer variable rate mortgages, but it is not offered with all variable plans.

Bottom line, you will be paying the difference eventually, but it offers some protection in the short term.

https://www.sbishinseibank.co.jp/retail ... vol72.html

[Tony]

Ours has gone up twice, once in the middle of last year after the BoJ originally ended negative interest rates, and again at the end of the year. We went from 0.82% to 1.07%. We're not terribly worried, but it is unfortunate.

[Tsumitate Wrestler]

Mizuho, who seems not to have changed rates, offers a clearer explanation for those that chose a variable mortgage protected by the 5 year/125% rule.

毎月の返済額は変更になりますか？
変動金利かつ元利均等返済でお借入中の場合、5年ルール・125％ルールに基づき、10月1日を基準とした5年間はご返済額に変更はありません（ご返済額の元金分と利息分の割合は変わります）。
変動金利かつ元金均等返済でお借入中の場合、5年ルール・125％ルールは対象外ですので返済額は変更になります。

＜5年ルール＞
元利均等返済の場合、金利に変動があった場合でもお借入日（固定金利選択を利用、適用期間終了後に変動金利を選択された場合は固定金利適用期間終了後）から10月1日を5回経過するまではご返済金額の中で元金返済分と利息分との割合で調整します。以降、10月1日を5回経過するごとに再計算して新しくご返済金額を定めます。
＜125%ルール＞
元利均等返済の場合、万一、金利が大幅に上昇した場合でも、新しいご返済金額は前回ご返済金額の125%を上限とします。
新しいご返済額は返済予定表にて連絡いたします。最終返済元金が多くなる場合も、返済期限の延長は行いませんので、最終返済日にご返済いただきます。

Will my monthly repayment amount change?
If you are borrowing at a variable interest rate with equal repayment of principal and interest, based on the 5-year rule and 125% rule, your monthly repayment amount will remain unchanged for 5 years from October 1 (the ratio of the principal portion to the interest portion of your monthly repayment amount will change).
If you are currently borrowing at a variable interest rate with equal repayment of principal, the 5-year rule and 125% rule do not apply, and the repayment amount will change.

<5-year rule
In the case of equal repayment of principal and interest, even if there is a change in interest rates, the repayment amount will be adjusted by the ratio of principal repayment to interest payment until the fifth anniversary of October 1 after the borrowing date (or after the end of the fixed interest rate application period if a variable interest rate is selected after the end of the applicable period). Thereafter, the repayment amount will be recalculated every five times after October 1 and a new repayment amount will be determined.
<125% Rule
In the case of equal repayment of principal and interest, even in the unlikely event of a significant increase in interest rates, the new repayment amount will be limited to 125% of the previous repayment amount.
The new repayment amount will be communicated in the repayment schedule. Even if the final repayment principal amount is higher, the repayment due date will not be extended, and the principal will be repaid on the final repayment date.

[tokyojo]

I got a letter from the bank I have my mortgage with yesterday -for the first time ever, the interest rate on the loan has gone up!

I originally borrowed at 0.5%

According to the letter (dated Dec 25th 2024) the interest rate has gone up by 0.15%, so the new interest rate is 0.65%

Anyone else?

Our mortgage is from MUFJ, and it increased by 0.15 from the beginning of December. They informed us about it a couple of months in advance.

[Deep Blue]

Actually Bloomberg just published a story leaked from BoJ saying it’s likely rates will go up next week unless we see a negative surprise from Trump before then.

A survey of economist and strategies shows 90% expect BoJ to hike to 0.50% this week.

Knowing economists, this means they'll stand pat... but seriously, expect prime rates and mortgage rates to be pushed higher again in the coming weeks/months.