Everyone knows that Japan deeply in debt and one way or another is going to suffer for it. But for those who thought the story couldn’t get any worse, well, the creativity of the financial repressors never ceases to amaze.
It turns out that, in addition to a government that borrows way too much money at unnaturally low rates — guaranteeing that rates can never be allowed to rise because the cost of paying even 2% interest would bankrupt the country — Japan’s homeowners have discovered the joys of adjustable-rate mortgages:
Homebuyers in Japan seen at risk amid floating-rate loan rush
Japanese homebuyers are piling into floating-rate mortgages, stirring debate over whether they are too complacent as Bank of Japan stimulus revives inflation.
The proportion of home loans with adjustable rates climbed to 42.8 percent of Japan’s new lending in February, the highest since December, according to the latest data from Japan Housing Finance Agency. The lowest variable mortgage rate at Japan’s three biggest banks was at 0.775 percent, compared with a 10-year fixed rate of 1.3 percent.
Outstanding housing loans to individuals expanded to ¥113.7 trillion ($1.1 trillion), the most since at least 1974 in June as BOJ Gov. Haruhiko Kuroda’s monthly sovereign bond buying aimed at ending deflation made it cheaper than ever to finance a home purchase. Borrowers like 30-year-old retail employee Eriko Brown, who chose a flexible-rate mortgage to buy a house this year, are betting rates won’t rise significantly, even as global policymakers fret over how to exit from easing.
“The market has become complacent about risks as monetary easing continues,†said Satoshi Okumoto, chief executive officer and president in Tokyo at Fukoku Capital Management Inc., which oversees the equivalent of $18 billion. “Homeowners aren’t worried about the risk of yields rising even if they borrow in floating-rate mortgages. They could be caught off guard.â€
