[Autumn 2026] Don't Panic Even If Interest Rates Rise! 5 Preparations for Home Loans for Parenting Generations

*This article provides general information. The figures are as of [October 16, 2026 (JST)].

Introduction

“The Bank of Japan is raising rates again. Is it safe to take out a loan?”
Recently, I have been receiving many consultations like this.

Let me give you the conclusion first.
Even in an era of rising interest rates, if you decide on the “borrowing amount” and “how to prepare” in advance, there is no need to panic.

In this article, we have organized the current situation of rising interest rates and summarized “5 preparations” that parenting generations can start today.
Once you finish reading, please try using a calculator once. That is the first step.

Key points of this article

• The Bank of Japan’s policy interest rate (a benchmark for banks when setting interest rates) is 1.25% per year

• The impact of the rise is also beginning to appear in variable interest rates (interest rates that are reviewed every six months, etc.)

• What is important is not the “amount you can borrow” but the “amount you can continue to pay”

• A repayment ratio (the percentage of annual income spent on annual repayments) of within 25% is a safe line

• Knowing the repayment amount in case interest rates rise “in advance” will reduce anxiety

What is happening with interest rates now?

Bank of Japan raises rates again in September 2026

On September 18, 2026, the Bank of Japan raised its policy interest rate from 1.00% per year to 1.25% per year.
This is an additional rate hike just three months after the June hike.

[Source: Dai-ichi Life Research Institute “Bank of Japan Monetary Policy Meeting (September 2026)” / Confirmation date: October 16, 2026 (JST)]

Fixed interest rates are also rising

Flat 35, the representative of fixed interest rates (where the interest rate at the time of borrowing never changes), is also rising.
The interest rate for October 2026 is 3.83% per year (for a loan period of 21-35 years and a down payment of 10% or more).

[Source: Diamond Real Estate Institute “October 2026 Home Loan Interest Rates” / Confirmation date: October 16, 2026 (JST). Please check the official website of the Japan Housing Finance Agency for the latest values]

*No one can predict future interest rate movements. The figures here represent the “current situation.”

If interest rates rise, how much will the monthly payment change?

We compared a 35 million yen loan over 35 years

*Assumptions: 35 million yen loan / 35-year repayment period / Equal principal and interest repayment (fixed monthly payment) / No bonus payments / Down payment and closing costs are separate

• 1.00% per annum: Monthly payment 98,800 yen / Total repayment approx. 41.5 million yen / Difference (monthly) –

• 1.50% per annum: Monthly payment 107,165 yen / Total repayment approx. 45.01 million yen / Difference (monthly) +8,365 yen

• 2.00% per annum: Monthly payment 115,942 yen / Total repayment approx. 48.7 million yen / Difference (monthly) +17,142 yen

• 3.83% per annum: Monthly payment 151,423 yen / Total repayment approx. 63.6 million yen / Difference (monthly) +52,623 yen

How does a ±0.25% change in interest rate affect things? (Sensitivity table)

• 0.75% per annum (-0.25%): Monthly payment 94,775 yen / Difference (monthly) -4,025 yen

• 1.00% per annum (baseline): Monthly payment 98,800 yen / Difference (monthly) –

• 1.25% per annum (+0.25%): Monthly payment 102,930 yen / Difference (monthly) +4,130 yen

A 0.25% difference is about 4,000 yen per month.
It’s easier to visualize if you think of it as ‘about the cost of one smartphone bill’.

A reasonable guideline is a ‘repayment ratio of within 25%’

These are the annual income guidelines to keep the repayment ratio within 25% (*Assumptions: calculated under the conditions above).

• At 1.00% per annum: Annual income of approx. 4.74 million yen or more

• At 1.50% per annum: Annual income of approx. 5.14 million yen or more

• At 2.00% per annum: Annual income of approx. 5.57 million yen or more

Financial institution screenings may allow you to borrow at a higher ratio.
However, the ‘amount you can borrow’ and the ‘amount you can comfortably repay’ are two different things.

5 Preparations for Parenting Generations

Preparation 1: Calculate if you can pay even if the interest rate reaches 2%

Don’t just calculate based on current interest rates;be sure to also look at the case where it rises by +1%.If you know you can still pay, you can also consider variable interest rates with a positive outlook.

Preparation 2: Work backward from the peak of education expenses

Education expenses increase significantly when your children enter high school and university.
Check a timeline to ensure you will be okay if your loan payments and education expenses overlap during that period.

Preparation 3: Keep separate savings for “prepayment”

Having savings for prepayment (paying off part of the loan early) provides peace of mind when interest rates rise.
However, the basic rule is to keep enough cash on hand (about six months’ worth of living expenses).

Preparation 4: Understand the “mechanisms” of interest rate types

For variable interest rates, some banks have a “5-year rule” and a “125% rule” (mechanisms to suppress sudden increases in repayment amounts).
However, the amount that does not increase is simply deferred, not eliminated.
*The presence or absence of these rules varies by financial institution. Please be sure to check with each financial institution.

Preparation 5: Decide with your spouse “how much is acceptable”

Discuss with your spouse in advance “how much you can comfortably pay each month.”
Deciding this before looking at properties will reduce hesitation.

Common failure patterns

• Deciding the repayment amount based only on “current interest rates”

• Borrowing up to the “maximum amount” approved in the screening

• Calculating without including future expenses such as education costs and car replacements

• Trying to rush to refinance to a fixed interest rate after interest rates have already risen

Checklist you can start today

• □ Wrote down how much of your current household budget can be used for monthly housing costs

• □ Checked the repayment amount if interest rates rise by +1%

• □ Calculated whether your debt-to-income ratio is within 25%

• □ Created a timeline of your children’s school advancement periods and education expenses

• □ Decided on a “maximum monthly amount” with your spouse

Summary

• The Bank of Japan’s policy interest rate is at 1.25% per year. Interest rates are on an upward trend.

• If rates rise by 0.25%, it is estimated that monthly payments for a 35 million yen, 35-year loan will increase by about 4,000 yen.

• The important thing is to decide on an ‘amount you can continue to pay’ first.

• If you ‘calculate in advance’ for interest rate hikes, you can minimize your anxiety.

The First Step

First, calculate how much you can borrow with a monthly payment equal to your current rent. If you are worried about calculating it yourself, why not do a financial simulation with Wise Home?

• Consultations are free.

• It is fine even before you have decided on a property.

• If you are considering other companies, please feel free to use us for a second opinion.

▶ Just send ‘Consultation Requested’ via LINE.

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*This article provides general information. Please check with each financial institution regarding loan screening and interest rates, and with a tax accountant regarding tax systems.

Wise Home Co., Ltd.
Osaka Prefectural Governor (3) No. 56723
2-3-19 Nagai-higashi, Sumiyoshi-ku, Osaka
TEL: 06-6606-0511
Web: y-zhome.jp

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