How High Will Mortgage Rates Rise? What Should Borrowers with Variable-Rate Mortgages Do?

Following the Bank of Japan's rate hike at its September monetary policy meeting, which raised the policy rate by 0.25%, Mitsubishi UFJ Bank and Mizuho Bank were reported to have announced that they would raise the short-term prime rate used as the benchmark for variable-rate home loans from 2.375% per annum to 2.625% per annum effective 2 November.

The timing of increases in applicable home loan rates varies by bank and contract, and an increase in the policy rate does not necessarily lead to an immediate increase in repayments.

As an indication of the impact of a 0.25% rate increase, an example based on a ¥30 million balance, 30 years remaining and equal principal-and-interest repayments shows monthly payments rising from approximately ¥96,500 to approximately ¥100,000, an expected annual increase of around ¥42,000.

Some variable-rate home loans use a five-year rule that keeps repayments unchanged for five years, or a 125% rule that caps repayments at 125% of the previous amount. These rules do not apply to all loans, and attention is also required regarding changes in the proportion of repayments allocated to interest.

The differential is substantial when switching to a fixed rate. As an example, new borrowing rates at Sumitomo Mitsui Banking Corporation as of September 2026 were reported to be as high as 3.70% to 4.45% per annum for a 10-year fixed rate, compared with a variable-rate floor of 1.325% per annum.

In response to rising variable rates, borrowers are advised to calculate repayment scenarios based on a further 1% increase using their own loan balance, remaining term and applicable rate, and consider how to respond based on their household financial flexibility.

The article concludes that home loan rates, review dates and the availability of the five-year and 125% rules vary by contract, making it important to check the terms offered by each financial institution.