The use of housing loans with terms of up to 50 years, far longer than the standard 35-year term, is spreading among younger generations in Japan amid a rise in housing prices.
Young Japanese are buying the properties of their choice by reducing monthly payments, but a longer loan term raises the total repayment amount and keeps company employees paying even after they retire.
The risk of interest rate fluctuations, caused by the Bank of Japan’s monetary policy shift, is another thing to worry about.
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In July, PayPay Bank began to offer 50-year loans, with 70 per cent of people in their 20s and 49 per cent of people in their 30s selecting repayment periods of more than 35 years to 50 years.
Other internet banks and regional banks are also providing longer-term loans, targeting people in those age groups. In principle, a customer must complete the payment by age 80.
According to calculations by Takashi Shiozawa of housing loan service provider MFS Inc., if a customer borrows 60 million yen (US$380,000) at an annual interest rate of 0.75 per cent, the monthly payment for a 35-year loan will be about 160,000 yen and the total amount of interest paid will be about 8.23 million yen.