Even if the Bank of Japan keeps interest rates on hold, the September rate hike will still affect home loans
On October 30, the Bank of Japan decided to keep its policy interest rate unchanged at around 1.25%. However, for those with variable-rate loans, interest rates will still rise regardless of this decision. This is because the impact of the September rate hike has not yet reached home loans.
The September rate hike will reach home loans soon
On September 18, 2026, the Bank of Japan decided to raise its policy interest rate from 1.0% to around 1.25%. Home loan interest rates did not rise immediately on that day.
When home loan interest rates rise depends on when banks increase the short-term prime rate, which serves as the benchmark for variable interest rates. For example, Mitsubishi UFJ Bank has announced it will raise its rate on November 2.
From there, the new rate is applied to your loan on the review date specified in your contract. According to Mitsubishi UFJ Bank’s explanation, if your contract involves reviews twice a year (April 1 and October 1), the November 2 increase will be applied during the April 1, 2027 review, and the new rate will be used to calculate repayments starting from the July payment.
Even if this time is a hold, this process will not stop. Check the notices from your bank to see the date of the increase and the review date.
The date when repayment amounts change depends on the loan type
After interest rates rise, when your monthly repayment amount changes depends on your specific loan type.
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Has the 5-year rule: Repayment amounts do not change until the 5-year milestone. Even during reviews, the increase is capped at 1.25 times the previous amount.
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Does not have the 5-year rule: Repayment amounts change in line with interest rate reviews.
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Principal-equal repayment: Repayment amounts change with every review, and there is no upper limit.
If you have the 5-year rule, your monthly repayment amount is protected, but the portion going toward interest increases, and the principal decreases more slowly. For someone who borrowed 40 million yen at 0.9% over 35 years, just a 0.25% rise in interest rates means the amount going toward the principal decreases by 8,333 yen per payment.
First, check your loan type using your repayment schedule
You need to check two things: whether your loan is principal-and-interest equal or principal-equal, and whether the bank you borrowed from has the 5-year rule. The repayment method is written in your repayment schedule or contract, and the presence or absence of the 5-year rule is written in the FAQ section of the bank’s website.
The next Bank of Japan meeting is on December 17 and 18. To avoid panicking every time a meeting occurs, make a note of your loan type and the month your repayment amount will change.
I have summarized the mechanics of the 5-year rule and how the principal decreases when interest rates rise with figures in this article.
My Home Research Institute Editor (Real Estate Notary / Financial Planner / Rental Real Estate Management Specialist)
Writing about home construction finances and contracts from a position of not selling homes.