Japan's real estate market is seeing a surge in demand for 50-year mortgage loans, particularly among young buyers in Tokyo. With average new construction prices exceeding 100 million yen (about 840 million won), many in their 20s and 30s are opting for these long-term loans to reduce their monthly repayments. The trend began in 2023 with Smishin SBINet Bank and has since spread to other internet and local banks, including Sony Bank. A survey in May found that 70% of recent borrowers expressed interest in switching to 50-year products.
The shift to longer mortgage terms has raised concerns among financial authorities. While monthly payments decrease, the total interest burden over the loan's lifetime increases significantly. Additionally, the risk of repayment difficulties after retirement is growing, especially if borrowers rely on selling their homes to pay off the loan. Fairloan, a joint loan option for dual-income couples, also poses risks if incomes drop due to divorce, illness, or job loss.
In response, the Japanese Financial Services Agency has issued warnings and tightened regulations. The agency noted that longer mortgage periods correlate with higher default rates and has ordered banks to explain the risks of interest rate fluctuations to consumers. Some financial institutions have begun strengthening their loan screening processes, considering collateral value, household income, and repayment capacity more strictly.
This trend mirrors a similar situation in South Korea in 2023, where 50-year mortgage loans contributed to a rapid increase in household debt. Korean authorities eventually limited the maturity of debt service ratio calculations to 40 years for borrowers who could not prove their repayment capabilities. The Japanese market now faces similar challenges as financial authorities and banks work to mitigate the risks associated with these long-term loans.