The Month Variable Interest Rates Exceeded 1% | A 37-Year-Old Who Ignored Their Loan for 3 Years Realizes a 160,000 Yen Annual Difference

This article is based on an actual consultation. Some details, such as age, occupation, and amounts, have been edited to ensure anonymity.

Salary is deposited on the 27th of every month. The mortgage payment is deducted on the 28th. For the past few years, I haven’t properly checked that amount.

Mr. S contacted me in the middle of September. His message read, “Sir, I saw on the news that variable interest rates have exceeded 1%. Is my loan okay?”

What you will learn from this article

• When and by how much will your repayment amount change if variable interest rates rise?

• In the case of Mr. S, who ignored his loan for 3 years, how much did it actually change?

• One thing you should check right now and the options to consider next

The client, Mr. S

Mr. S is a 37-year-old company employee. His wife is 35 and works part-time, and they have two children, one in third grade and one in kindergarten. In 2021, they purchased a newly built detached house in the suburbs of Saitama.

The loan amount was 42 million yen with a 35-year repayment period, and he chose a variable interest rate. The interest rate at the time was 0.475%. He said he signed the contract as is because the sales representative told him, “Variable is definitely the best deal right now.”

Three years have passed since he took out the mortgage. During that time, he never once checked the details of his loan repayments. Since the deduction amount hadn’t changed, he assumed there were no issues.

Do you know the amount of your mortgage deduction for this month?

Understanding the mechanism of variable interest rates

There are two rules for variable interest rates.

The first is that interest rates are reviewed every six months. The second is that repayment amounts are changed every five years.

In other words, even if interest rates rise, the repayment amount does not change immediately. However, the interest accrued from the rate hike accumulates. If the interest rate rises while the repayment amount remains the same, the reduction of the principal slows down.

Q: When does the repayment amount change if the variable mortgage interest rate rises?

A: Variable interest rates are reviewed every six months, but repayment amounts only change every five years. However, there is a limit where the repayment amount cannot exceed 1.25 times the current amount (the 125% rule). This is why the repayment amount doesn’t increase immediately even if interest rates rise, but because the principal reduction slows down, the total repayment amount increases.

The reason Mr. S thought “it’s fine because the deduction amount hasn’t changed” was because he didn’t know about this mechanism.

In Mr. S’s case, how much did it actually change?

I reviewed the current situation with Mr. S.

The interest rate at the time of the contract in 2021 was 0.475%. The monthly repayment amount at that time was approximately 107,800 yen.

As of September 2026, the variable interest rates at major banks have risen to the 1.1% range. Mr. S’s applicable interest rate had risen accordingly.

Recalculating with the current interest rate of 1.1%, the monthly repayment amount becomes approximately 121,200 yen.

The difference is 13,400 yen per month. That is a difference of 160,800 yen per year.

Mr. S was silent for a while. He asked, “This difference hasn’t been there for all three years, right?” Since interest rates have risen in stages, it is necessary to recalculate the cumulative total, but it was a fact that a considerable difference had accumulated over the past few years.

“I felt relieved because the withdrawal amount hadn’t changed, but in reality, I was losing money.”

That was what he said. Rather than a loss, it was simply that he hadn’t been seeing it. However, it is certain that his judgment was delayed because he didn’t know.

The answer to the question, “Should I switch to a fixed rate?”

This was the next question that came from Mr. S.

Q: Should I switch to a fixed interest rate when the variable rate reaches the 1% range?

A: It cannot be said unconditionally. Fixed interest rates are currently mostly in the 1.5% to 2% range, which is a higher level than variable rates. The timing of a switch depends on the prediction of “how much interest rates will rise in the future,” but no one knows that. The point of judgment is not the interest rate level, but whether the household budget can withstand it if the monthly repayment amount increases from what it is now. Households that can afford the increase without affecting their daily lives may have no problem continuing with a variable rate, while households without that leeway should consider switching to a fixed rate or making early repayments.

In Mr. S’s case, the household take-home pay, including his wife’s part-time income, was about 370,000 yen per month. The impact of a 13,400 yen monthly increase on the household budget was not small, but it was not at a fatal level.

What I told Mr. S was that there are two things to check before deciding between fixed or variable.

The first is the proportion of the current repayment amount to the entire household budget. The second is what the cash flow looks like when combined with education expenses, insurance, and NISA contributions. You can’t make a judgment by looking at the mortgage alone.

Things to check right now

Through my consultation with Mr. S, there is something I felt once again.

People carefully research mortgages before taking them out, but they are easily ignored after they are taken out. This was the same in my experience as a teacher; the more effort people put into preparing at the beginning, the more they tended to feel relieved and forget about it afterward.

There are two things I want you to check right now.

Compare this month’s mortgage withdrawal amount with the monthly repayment amount at the time of the contract. If there is a difference, your interest rate may have risen. If there is no difference, the reduction of your principal may be slowing down within the scope of the 5-year rule. Either way, understanding your current situation is the starting point for your next decision.

Try having this conversation with your partner:

“Do you know how much we are paying for our loan right now?”

This single question can be the start of a total review of your household finances.

For those who want to check the status of their entire household finances, including their mortgage, I have created an asset formation simulator.

By simply entering your age, annual income, family structure, insurance premiums, NISA contribution amount, mortgage, and monthly surplus, you will get three figures in one minute.

・Asset forecast at age 65
・Amount that could potentially be improved
・An image of what will happen if you continue as you are

Once you can see your “current position,” it becomes clear what you should act on first. If you would like to use it, please send “Asset Formation” to the official LINE account. I will provide it for free.

■ Gunji-sensei Official LINE

#Mortgage #VariableInterestRate #InterestRateHike #HouseholdBudgetReview #MortgageReview #DualIncomeHousehold #MoneyInYour30s #FPSonsultation #AssetFormation #LifePlan