MUFG and SMBC raise variable mortgage rates by 0.25 percentage points

MUFG Bank and Sumitomo Mitsui Banking Corporation raised variable housing-loan rates by 0.25 percentage points on September 1, increasing financing costs for new homebuyers already facing high residential property prices.

At MUFG, the preferential variable rate for qualifying new borrowers rose from 0.945% in August to 1.195% in September. Its posted variable rate is now 3.375%.

SMBC also raised its posted variable rate from 3.125% to 3.375%. Its September preferential rate for qualifying new borrowers rose to about 1.525%, although actual offers depend on product terms and underwriting.

What another 0.25 percentage points costs

Using MUFG's increase from 0.945% to 1.195%, and assuming a 35-year principal-and-interest mortgage:

• JPY 50 million loan: about JPY 5,900 more per month

• JPY 75 million loan: about JPY 8,800 more

• JPY 100 million loan: about JPY 11,700 more

These examples show the impact on a new borrower taking a mortgage at the higher rate. Existing borrowers are more complicated.

The base rate is not necessarily the rate you pay

Japanese variable mortgages can be understood as:

Base rate - preferential discount = borrower's actual interest rate

At MUFG in September, the posted rate is 3.375%. A qualifying new borrower receiving a 2.180-percentage-point discount would therefore pay 1.195%.

That preferential discount is generally not a temporary teaser rate. The discount is typically set under the loan agreement, while the underlying base rate can later change.

Date	Base rate	Discount offered to new borrower	New-borrower rate
2020	2.475%	-2.000 pp	0.475%
2023	2.475%	-2.130 pp	0.345%
2026	3.375%	-2.180 pp	1.195%

The table also shows why advertised new-borrower rates can move differently from base rates. Between 2020 and 2023, MUFG's base rate stayed at 2.475%, while a larger discount pushed the new-borrower rate down from 0.475% to 0.345%.

An existing borrower would not automatically receive that lower new-customer rate.

The base-rate history therefore tells a different story. After remaining unchanged for years, variable mortgage benchmarks at MUFG and SMBC have risen repeatedly since 2024.

For existing borrowers, those base-rate changes matter more than changes in discounts offered to new customers.

Existing borrowers may not pay more immediately

A higher base rate does not necessarily mean an immediate increase in the monthly mortgage debit.

There are three separate moving parts: the bank's base rate, the actual interest rate charged after the borrower's discount, and the monthly repayment.

At MUFG, existing variable loans are repriced according to the mortgage type. For eligible equal principal-and-interest loans, the bank also applies the commonly known "5-year rule," under which the scheduled payment can remain unchanged even after the interest rate rises.

When that happens, more of each payment goes toward interest and less toward reducing principal.

MUFG also applies a 125% rule when eligible repayments are recalculated, limiting the new payment to 125% of the previous amount. SMBC uses a similar structure for qualifying equal principal-and-interest variable mortgages.

These rules smooth the immediate cash-flow effect of higher rates. They do not eliminate the extra interest cost.

Why rates are rising

Variable mortgage rates in Japan are closely linked to banks' short-term prime rates.

As Bank of Japan tightening pushes short-term rates higher, banks can raise their prime rates, which then feed into variable mortgage benchmarks. MUFG has explicitly linked its September adjustment to its earlier short-term prime-rate increase.

The timing differs by lender. Mizuho, Resona and Sumitomo Mitsui Trust did not make an equivalent September increase in their preferential variable mortgage rates.

Why this matters for housing affordability

Variable mortgages remain especially important in Japan. A Japan Housing Finance Agency survey found that 75.0% of respondents who obtained a home loan between April and September 2025 chose a variable rate.

The increase also comes after years of rising home prices, particularly in central Tokyo and other expensive urban markets.

Photo by Vien Dinh on Unsplash

Buyers are therefore being squeezed from two directions: they need larger mortgages to purchase expensive homes, while the cost of financing those mortgages is also rising.

For sellers, that matters because higher borrowing costs can limit how far buyers are able or willing to stretch on price. Even if headline property values remain high, financing constraints can make it harder for households to support continued increases.

Another 0.25 percentage points is unlikely by itself to determine the direction of residential prices. But repeated rate increases, combined with broader inflation that is already putting pressure on household budgets, can gradually reduce borrowing capacity, soften buyer sentiment and narrow the pool of households able to afford higher-priced homes.

That could push some buyers toward cheaper properties, existing homes or locations farther from the most expensive central areas, while sellers may need to become more realistic about how much additional price appreciation the market can absorb.

Japan remains a relatively low-rate mortgage market. What is changing is the extent to which exceptionally cheap variable financing can support high home prices.

As that support weakens, financing costs are becoming a more important constraint not only on what buyers can afford, but also on how strongly sellers can continue to price.

Further Reading:

MUFG Housing Loan Interest Rates (Japanese only)

MUFG Notice on Changes to Variable Housing-Loan Benchmark Rates (Japanese only)

SMBC Housing Loans for New Borrowers (Japanese only)

SMBC Historical Housing-Loan Interest Rates (Japanese only)

Japan Housing Finance Agency Mortgage Borrower Survey (Japanese only)