The Bank of Japan’s second interest-rate hike in nearly two decades is set to impact millions of personal mortgages, raising borrowing costs for homebuyers for the first time in a generation.
Mitsubishi UFJ Financial Group, Japan’s largest bank, said it plans to increase the short-term prime rate for the first time in 17 years in September, following the central bank’s move on Wednesday. Other lenders are expected to follow. About 75% of personal mortgages in Japan are floating-rate loans tied to the short-term prime rate set individually by banks.
The prospect of higher mortgage costs could put a dampener on already weak household confidence as well as the housing market. Shares of real estate companies fell the most among all industry groups in Tokyo trading on Thursday. For banks, it will boost the profitability of loans.