The Bank of Japan has raised the policy interest rate to 1%. What people with variable-rate mortgages should check 'right now'
Hello, this is Shibil.
On June 16, 2026, the Bank of Japan raised the policy interest rate to 1.0%.
This is a level not seen in about 30 years.
To those who think ‘this doesn’t concern me,’ I want to be honest with you today.
For those who have taken out a variable-rate mortgage, the ‘clock has started ticking’ from this moment.
What happened? [Check with the latest data]
On June 16, 2026, the Bank of Japan decided to raise the policy interest rate to 1.0%, the first time in about 30 years. Ordinary deposit interest rates will rise to 0.4% per annum starting in August 2026. The full impact on variable mortgage rates is expected to be felt around October 2026.
Since the lifting of negative interest rates in March 2024, the Bank of Japan has been implementing rate hikes in stages, and the policy interest rate has been raised incrementally. A terminal rate (final target interest rate) of around 1.5% is considered likely.
In other words, ‘it will go up further.’
Schedule of impact on variable interest rates
Variable mortgage interest rates rise a few months after the policy interest rate is raised. The increase will become noticeable around October 2026, and it is likely that the impact on the repayment amounts of existing borrowers will be reflected from January 2027 onwards.
The impact will be gradual.
However, doing nothing while thinking ‘it’s still okay’ is the biggest risk.
How much will the repayment amount increase? [Simulation]
For a 30 million yen loan over 35 years, a 1% increase in interest rates will result in an additional burden of approximately 15,000 yen per month, or about 6.17 million yen over 35 years.
If the policy interest rate is raised four times to 1.75%, the variable mortgage interest rate of major city banks could simply rise to 1.95%. In the case where the 5-year rule is applied, the monthly repayment amount of 112,000 yen for years 1 to 5 will rise to 134,000 yen in the 6th year.
An additional burden of 20,000 yen per month is 240,000 yen per year. That is 2.4 million yen over 10 years.
This is not ‘within the margin of error.’
The pitfall of the ‘5-year rule and 125% rule’
There are two rules for variable interest rates.
5-Year Rule: Repayment amounts are reviewed every five years. Even if interest rates rise, the repayment amount remains unchanged for five years.
125% Rule: Increases in repayment amounts are capped at 125% of the previous amount. This is a rule to prevent sudden spikes.
However, the 5-year rule and 125% rule are just ‘deferring payments,’ and the burden does not disappear.
Even while the repayment amount remains the same, the interest rate increase accumulates as ‘unpaid interest’.
It is a ‘hidden bomb’ where the principal does not decrease, and future repayment amounts increase.
3 things to check right now
Check 1: Accurately understand your current variable interest rate
Check via bank notifications, contracts, or online banking.
Do not rely on a vague sense of ‘around 0.5%’; understand the exact figure.
Check 2: Estimate repayment amounts if interest rates reach 1%, 1.5%, or 2%
Calculate each case of ‘1%, 1.5%, and 2% interest’ using a bank simulator.
It is important to understand in numbers ‘how much the monthly payment will increase in the worst-case scenario’.
Check 3: Compare the costs of refinancing to a fixed interest rate
Flat 35 rates have reached 3.83%, the highest since tracking began. The interest rate gap between variable and fixed has widened to 2.50%, the largest level on record.
At this moment, variable interest rates are significantly lower than fixed rates.
However, depending on ‘how high interest rates go,’ refinancing to a fixed rate could become advantageous.
About my home and loan
My property is in Tokyo, a ten-plus minute walk from the station, and is 32 years old.
Regarding my mortgage, I manage it while keeping an eye on the balance of my overall fixed costs.
Even in a period of rising interest rates, I am conscious of the balance between ‘securing surplus funds for investment’ and ‘optimizing loan repayments’.
If interest rates exceed 2%, I am considering switching to a ‘priority on early repayment’ strategy.
Summary
With the interest rate hike in June 2026, variable interest rates are on an upward trend. Those currently repaying loans may see an impact from January 2027 onwards. If interest rates rise by 1%, a 30 million yen, 35-year loan will result in an increase of approximately 14,000 yen per month and a total burden increase of approximately 6 million yen.
What you can do today is simple.
1. Check your current variable interest rate. 2. Calculate based on an interest rate hike scenario. 3. Understand your options for refinancing to a fixed rate.
I would like you to finish these three things today.
Do you have a variable-rate loan? How are you taking this latest interest rate hike?
If this article was even a little helpful, it would encourage me if you could support me with a ‘Like’.
X: @ko_ji11