Housing Loan in Japan: Fixed Rate vs Floating Rate

  • Advice

If you are at a stage where you are planning to get a mortgage in Japan, choosing the best mortgage option is always difficult. One of the things that tends to bother applicants is whether to go for fixed interest rate or floating interest rate.

Let’s see which option is better for you.


Fixed Rate vs Floating Rate: Which one Japanese people do prefer?

The Japan Housing Finance Agency conducted a survey that found in 2014, 40% of mortgage applicants chose floating rate whereas almost 30% chose fixed rate. Although the majority of applicants have chosen a floating rate for the past years, the numbers of people who choose floating has decreased since.

Fixed Rate vs Floating Rate

Japan has experienced extremely low-interest rates since the 1980s. However, due to the concerns that interest rates may rise in the near future, the shift towards fixed-rate mortgages can be observed.


Fixed-Rate Mortgage in Japan

A fixed-rate mortgage offers a sense of stability and certainty as the interest rate is fixed meaning the interest rate does not change with market fluctuations. The best part of a fixed-rate mortgage is that you can have a fixed monthly repayment schedule that is easy to budget and does not fluctuate. In Japan, there are also fixed-rate re-selection mortgages where the interest rate for the first three, five, seven or ten years can be fixed and borrowers will get to choose to either stay on a fixed rate or switch to a floating rate. A borrower can also split the mortgage amount into a fixed-rate portion and a floating-rate portion.


“Flat 35” loans are long-term fixed-rate mortgages that can be repaid between fifteen to thirty-five years. The Japan Housing Finance Agency (JHF) provides this ‘Flat 35’ collaborating with private financial institutions. ‘Flat 35’ offers some discounts for the properties that have earthquake resistant and energy saving features.

The downside of a fixed-rate mortgage is that fixed rates are usually higher than floating rates.


Floating Rates Mortgage in Japan

A floating interest rate means that the rate of interest varies with market conditions.

Choosing floating-rate mortgage is popular among Japanese since they can enjoy the benefits of low-interest rates. Additionally, they are cheaper than fixed interest rates.

Floating-rate mortgages suit those who have enough savings to pay off the gap between floating before and after the interest rate increased. If you choose to receive a mortgage from banks, most banks offer floating-rate mortgages.

We strongly recommend you to choose the best option for you referring to the comparison above.