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The story
On October 1, the Japan Housing Finance Agency announced the applicable interest rates for October on “Flat 35,” a fixed-rate home loan with a maximum term of 35 years. The lowest rate, applied when the loan amount is 90% or less of the home’s purchase price, rose to 3.830% per year — the highest level since the system was revised in October 2017. On 5ch, a thread saw opinions clash between those who argue you should just buy a house outright in cash and those who say it’s more rational to take out a loan while rates are still relatively low and put spare cash into investments instead, with the debate spreading into whether new-builds or resale homes are the better deal, and whether renting beats owning.
What people said
The Asahi Shimbun
On the 1st, the Japan Housing Finance Agency announced the October interest rates for "Flat 35," a home loan that fixes the rate for up to 35 years. The lowest rate, which applies when the loan amount is 90% or less of the home's purchase price, rose to 3.830% per year — the highest it has been since the system revision took effect on October 1, 2017.
My old man saved up and bought his place outright in cash.
Did the same thing when he rebuilt it, too.
That's the thinking of someone with no financial literacy.
You keep your cash and deliberately borrow instead, so you can invest it at a return higher than the loan rate.
Sure, that's great — if you completely ignore the benefit of actually getting a house right now lol
Yeah, rates were super low back then, and now it's gone up so much you'd turn a solid profit if you sold.
Real estate, who knows.
You think resale homes are actually cheap?
People keep living in the good locations, so they don't come cheap.
Usually it's tiny new-builds that end up being the cheap option.
I bought mine for 7 million yen.
10-year loan.
It's a slave contract — paying more than the variable rate for 35 straight years.
Who'd actually pick this?
Eventually the variable rate will overtake it somewhere along the line — it just hasn't happened yet because Japan's being dumb about it right now.
Putting my spare cash into investments instead.
Rent goes up too, obviously.
Not like it matters if a single person owns a home or not.
They'll end up in a nursing home anyway to avoid dying alone.
That's the basic idea, but worst case it ends up in court.
Depends on how serious the landlord is about it.
If there's a legitimate reason, rent increases are legally allowed.
Because it's too cramped.
3.8% on 100 million yen is like twice my annual salary.
Decided to build it when my wife got pregnant with our 7th kid.
It's a 6-bedroom house (6LDK — 6 rooms plus living/dining/kitchen).
You got this, dad.
Recently-built properties are about to get cheap, I'm so excited lol lol
That just means more people won't be able to afford those cheaper properties.
Re: #62
Sounds like plenty of people have already let theirs go.
Might as well get an Alphard (Toyota's premium minivan) while you're at it.
Would people who say that actually dump all their securities in one go just to buy a house?
If not, you're no different.
They're probably not okay, that's why they're not posting.
Doesn't matter at all to people who already locked in a fixed rate.
No idea what happens to the variable-rate folks, but variable rates are low to begin with anyway.
You get a letter saying you've lost your right to installment payments (i.e., the full remaining balance becomes due immediately).
Your house gets seized, and you're still stuck with part of the loan.
Amateurs investing on their own just end up failing anyway.
My index investments are over 100 million yen. The mortgage tax deduction (minus 1%) still has about 6 more years to run, so I'm doing just fine.
Background and key points of this story
Flat 35 is a fully fixed-rate home loan offered jointly by the Japan Housing Finance Agency and private financial institutions, with its rate revised monthly in line with movements in government bond yields, the benchmark for long-term interest rates. This month’s 3.830% is the highest level since the October 2017 system revision, reflecting the ongoing rise in long-term rates. The thread was dominated by a clash between the “pay cash outright” camp and the “borrow while rates are still low and invest the spare cash” camp, but what went largely unmentioned is that, since Flat 35 is a fixed-rate loan to begin with, future rises in variable rates won’t directly affect its repayment amount. Also, the strategy of skipping early repayment and keeping a long loan can swing either way in terms of profit and loss depending on how long the mortgage tax deduction applies and how investment returns actually turn out — it’s not a simple case of one approach being clearly better.
※This article is an excerpt and summary based on the 5ch (News Speed+) thread “[Home Loans] Flat 35 Mortgage Rate Hits Record High of 3.830%.”
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