How Does a Rise in Long-Term Interest Rates Change Our Lives? Five Perspectives: Mortgages, Savings, Investments, Businesses, and Public Finance
When we hear that “interest rates are rising,” we tend to focus only on the story of increasing mortgage repayments. However, while it may be a burden for borrowers, it can be a tailwind for savers and those buying new bonds.
I live with my wife and son, and while paying off a mortgage on a second-hand condominium, I continue to build assets through NISA and other means. Therefore, interest rates are not just “numbers that only experts look at,” but material for thinking about how to protect household finances and investment strategies at the same time.
In this article, based on public documents as of September 20, 2026, I will organize the rise in long-term interest rates from five perspectives, without reducing it to a binary choice of good or bad.
First, let’s confirm: It was the short-term policy interest rate that the Bank of Japan raised directly.
On September 18, 2026, the Bank of Japan decided to raise the target for the uncollateralized overnight call rate, which is the short-term policy interest rate, from around 1.0% to around 1.25%. The new policy will be applied from September 24.
On the other hand, the representative long-term interest rate is the yield on 10-year government bonds. This is not a figure that the Bank of Japan decides directly at each meeting, but is formed in the bond market.
The two are not unrelated. Expectations of how high future short-term interest rates will rise, outlooks for prices and the economy, supply and demand for government bonds, overseas interest rates, and confidence in public finance are all factored into long-term interest rates.
In other words, looking at this rate hike and thinking, “Since the policy interest rate has risen by 0.25 points, long-term interest rates will definitely rise by 0.25 points as well,” is too simplistic.
In the 10-year government bond auction held by the Ministry of Finance on September 1, 2026, the average successful bid yield was 2.995%. While this is the result for that day and not a figure that promises the future, we can see the change from the era when we could assume “almost zero.”
If we visualize the overall picture of the impact first, it looks like this.
Even with the same interest rate hike, the perception of borrowers and savers is opposite.
Perspective 1: Mortgages: What matters is the content of the contract, not whether it “rises”
When long-term interest rates rise, there is upward pressure on the interest rates of newly borrowed fixed-rate mortgages. Since variable rates have a stronger relationship with short-term interest rates, this policy interest rate hike cannot be ignored either.
However, the impact is not uniform even for the same mortgage.
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Is it a full-term fixed rate, a fixed-period selection, or a variable rate?
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When is the interest rate reviewed?
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Are there rules for reviewing repayment amounts?
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What are the balance and remaining period?
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How much are the various costs for refinancing?
The impact on household finances changes depending on these five points.
For example, in a simple calculation for a new 35-million-yen loan over 35 years with equal principal and interest payments and no bonus payments, the monthly payment would be approximately 107,200 yen at a 1.5% interest rate, approximately 115,900 yen at 2.0%, and approximately 125,100 yen at 2.5%.
Loan Interest Rate Monthly Payment Difference from 1.5% 1.5% Approx. 107,200 yen ― 2.0% Approx. 115,900 yen Increase of approx. 8,800 yen 2.5% Approx. 125,100 yen Increase of approx. 18,000 yen
This is a calculation example that does not include fees or actual interest rate review rules. It does not mean that the repayment amount of a variable-rate loan you currently have will increase immediately in the same way.
I am building assets while paying off a mortgage, but I want to avoid using my emergency fund for early repayment just because interest rates have risen. This is because if the cash in the household budget becomes thin, it will be harder to cope with illness or a decrease in income.
The order of early repayment and investment is explained in detail in Should You Make Early Mortgage Repayments? 3 Judgment Criteria Compared to NISA Accumulation.
Perspective 2: Savings and Bonds: Rising Interest Rates Can Also Be a Tailwind for ‘Savers’
Rising interest rates are not just a burden for borrowers. If interest rates on ordinary and time deposits, as well as yields on newly issued government and corporate bonds rise, the interest earned from cash and bonds will increase.
In the September 2026 offering by the Ministry of Finance, the coupon rate for individual government bonds ‘Variable 10-Year’ was 1.95% per annum, and for ‘Fixed 5-Year’ it was 2.24% per annum. These are pre-tax figures and are not guaranteed to be the same in the future, but the need to assume that ‘savings and safe assets will hardly grow’ has diminished.
On the other hand, caution is required for fixed-rate bonds you already hold. As market interest rates rise, new bonds with higher yields become more attractive, so the market price of existing bonds generally falls. The perspective changes depending on whether you hold them until maturity or might sell them midway.
In a phase of rising interest rates, rather than moving all your cash into investments, it is worth periodically checking the location and interest rates of your emergency fund. The necessary cash for households with children and mortgages is summarized in Procedures for Calculating Emergency Funds from Household Expenses.
Perspective 3: Stocks and Investment Trusts: ‘Rising Interest Rates’ Does Not Mean ‘Across-the-Board Decline’
When interest rates rise, the present value of future profits decreases. Therefore, it is explained that the higher a company is valued based on growth expectations in the distant future, the more likely it is to face downward pressure on its stock price.
However, not all companies move in the same direction.
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Banks may see improved earnings if the spread between lending rates and deposit rates widens
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Companies with high debt are more likely to face increased interest payment burdens
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Companies with large cash reserves can expect an increase in interest income
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The impact on export-oriented companies and domestic demand-oriented companies changes depending on exchange rate and price movements
The Bank of Japan’s Financial System Report also reports that while rising yen interest rates boost banks’ net interest income, they have also been a factor in bond sale losses. Rising interest rates are a factor that determines winners and losers depending on the industry and financial condition.
I personally invest in the S&P 500, All Country, gold, and individual stocks. Rather than stopping or restarting my monthly accumulation in detail by watching long-term interest rates, I first check whether my household’s surplus capacity is being maintained.
If you are unsure whether to reduce your investment amount, check the conditions of your household budget rather than market forecasts. 4 Signs to Review Your NISA Accumulation Amount can also be used for that judgment.
Perspective 4: Businesses and Employees: The Link Between Financing Costs, Wages, and Employment
When companies raise funds through bank loans or corporate bonds, rising interest rates become a cost. This burden is particularly heavy for companies with high debt relative to their profits, or those that struggle to pass on rising raw material and labor costs to their selling prices.
Conversely, companies that have strong demand and are able to pass on price increases and raise wages can continue to invest while weathering higher interest rates.
If a company cuts back on capital investment due to the burden of interest payments, it could also affect hiring, salary increases, and bonuses. It is worth checking the interest rate resilience of the company or industry you work in.
When looking at financial statements, check not only the amount of debt but also whether interest is being paid out of operating profit or operating cash flow, and whether the mix of fixed/variable debt and repayment deadlines is balanced.
Perspective 5: National Finance: Increasing Interest Payments Narrow Future Options
When the interest rate on government bonds rises, the government must pay more interest on newly issued and refinanced bonds. However, since government bonds issued in the past at lower rates are not replaced all at once, the impact will spread over time.
The Ministry of Finance has provided a mechanical projection showing that if interest rates from fiscal year 2026 onwards rise by 1% compared to current assumptions and remain flat thereafter, the government’s interest payments will grow from 10.5 trillion yen in fiscal year 2025 to 34.4 trillion yen in fiscal year 2034.
This is not a prediction, and the results will change depending on economic growth, tax revenue, and the maturity structure of government bonds. However, if interest payments increase, competition for budget allocations with social security and education will intensify.
On the other hand, if prices and wages rise, and nominal GDP and tax revenue also grow, it is not accurate to focus solely on the burden of rising interest rates. We need to look at not just the fact that ‘interest rates have risen,’ but also why they have risen.
Will rising interest rates curb the weak yen and inflation?
Generally, if Japanese interest rates rise relative to those overseas, the appeal of holding yen may increase, potentially working to curb the yen’s depreciation. If the yen stabilizes, it could also have the effect of easing the rise in import prices.
However, exchange rates are not determined solely by interest rate differentials between countries like Japan and the U.S. They are also moved by overseas economic conditions, geopolitical risks, investor risk appetite, and views on public finance. There may be scenarios where the yen continues to weaken even after a rate hike.
It is safer not to view rising interest rates through a single causal relationship, such as ‘it is bad for mortgages but will definitely fix the weak yen.’
The order in which I check my household finances
It is impossible to predict the future of interest rates. Therefore, I check my household finances in the following order rather than relying on predictions.
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Check the mortgage interest rate type, next review date, outstanding balance, and remaining term.
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Calculate repayment amounts if interest rates rise by 0.5% or 1.0%.
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Confirm whether repayments can be continued without using emergency savings.
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Review where to keep protected money, such as in savings or individual government bonds.
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NISA should be adjusted when your household’s financial buffer is compromised, rather than based on market predictions.
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When considering early repayment or refinancing, compare the options including fees and mortgage tax deductions.
Since I was earning about 180,000 yen in take-home pay, I have built a system to set aside money for savings and investments as soon as I receive my salary. Now that I have a family and a mortgage, I place more importance than before on having ‘cash that I can hold onto without selling during sudden changes,’ rather than just focusing on investment efficiency.
A rise in long-term interest rates is not a universally negative factor for everyone. It can increase the burden on those with significant debt, while those with savings or new bonds can expect improved interest income. While it is a cost for businesses and the government, it can be viewed differently if it is the result of healthy growth accompanied by rising prices and wages.
Instead of drawing conclusions based solely on numbers in the news, check how much you stand on the ‘borrowing side’ versus the ‘saving side.’ I believe that organizing your mortgage, cash, and investments from that starting point is a better way to protect your household finances than trying to guess interest rate trends.
*This article is intended for general information purposes only and does not recommend any specific financial products or mortgage contracts. Since interest rates, systems, and product terms change, please check your contract documents and the latest information from your financial institution.