Benchmark lending rates are substantially higher
Bank of Japan data updated on August 18 show the long-term prime rate at 3.25% from August 12. It was around 2% at the beginning of 2025, illustrating how significantly medium- and long-term financing conditions have shifted. The most commonly adopted short-term prime rate among major banks also rose to 2.375% from August 3. Separately, the Bank of Japan has been guiding the uncollateralized overnight call rate at around 1.0% since June. Prime rates are not identical to the rates offered on individual mortgages, but they are important reference points for understanding the direction of bank lending costs.
Borrowing capacity and affordable repayments increasingly diverge
Higher rates increase monthly repayments for the same principal and can reduce the amount households or investors can safely borrow. Variable-rate mortgages, fixed-period products and full-term fixed loans are priced differently, and lender discounts can produce large differences in actual rates. It would therefore be incorrect to apply the 3.25% long-term prime rate directly to a specific home loan. Nevertheless, buyers can no longer assume that financing costs will remain near the ultra-low levels seen earlier in the decade. For investment property, higher borrowing costs also compress the spread between rental yield and interest expense.
Nonresident financing remains highly case-specific
Foreign and nonresident borrowers generally face a narrower lender universe than domestic owner-occupiers. Loan-to-value ratios, property type, location, corporate structures and residency status can materially affect available terms. Investors should compare not only the headline interest rate but also repricing conditions, fixed-rate periods, early repayment rules, bank fees and foreign-exchange exposure. Bank of Japan policy and commercial bank lending behavior will therefore remain central to both housing demand and leveraged real estate investment during the remainder of 2026.