In the mortgage market, where interest rates tied to the Bank of Japan's rate hikes continue to climb, major banks and regional banks are gaining prominence. According to MFS, which operates the mortgage comparison and diagnosis service Mogecheck, of the mortgage applications submitted through the service in August, online banks accounted for 41.5%, regional banks 37.7%, and megabanks 19.9%, a sharp narrowing of the gap from March, when online banks held 80%. Behind this is the shrinking difference in offered rates: the August average rate for variable-rate loans, chosen by most users, was 1.21% at online banks, 1.23% at regional banks, and 1.08% at megabanks. MFS director Takashi Shiozawa notes that with the arrival of a world with interest rates, the cost of procuring deposits has become the key to competition, and megabanks and regional banks, which hold salary-transfer accounts and the like, are beginning to gain a relative advantage. The BOJ intends to continue raising rates, and online banks appear set to remain in a position where they must put the brakes on mortgage lending. Meanwhile, fixed-rate loans tend to move in line with long-term rates and currently exceed variable rates by more than 2 percentage points; Shiozawa points out that nine 0.25% rate hikes would be needed for the rate gap to reverse, and takes the view that variable-rate loans will remain advantageous for the time being. Naoki Hattori, chief Japan economist at Mizuho Research Institute, expects that as the BOJ's rate hikes progress, the risk of excessive inflation will diminish and upward pressure on long-term rates will gradually ease, predicting that the impact this time will be smaller than at the time of the BOJ's June rate hike.
