Negative rates a boon to mortgage refinance for Japan's Internet banks

Aeon Financial Service Co

31/03/2016 09:25

By Taiga Uranaka 
    TOKYO, March 31 (Reuters) - Japan's shift to negative 
interest rates is driving a loan refinancing boom, with local 
internet banks seeking to grab customers from bricks-and-mortar 
rivals in the country's $1.6 trillion mortgage market.  
    While it remains to be seen whether the Bank of Japan's 
controversial move will spur new home purchases or loosen 
consumers' purse strings, both large and small lenders are 
seeing a marked jump in the number of mortgage refinancing 
applications. 
    Growth has been particularly strong for banks with low 
overheads who are able to pass on a larger part of the rate cut 
to customers, notably Internet banks. 
    SBI Sumishin Net Bank said the number of applications for 
mortgage refinancing jumped by three times in February from the 
previous month, following the BOJ's late January announcement. 
It said it was seeing the faster pace of growth in March. 
    "It is far more than we had expected," said Kensuke Shimai, 
general manager at the bank's private mortgage business 
department. 
    Without costly branch networks and with smaller headcounts, 
SBI Sumishin and other Internet banks typically offer lower 
mortgage rates than institutional rivals. 
    SBI Sumishin's floating rate for refinancing in March is 
0.565 percent. Comparable rates for Japan's biggest lenders are 
0.625 percent. 
    Traditionally, mortgages for first-time borrowers are 
dominated by established lenders with strong ties to residential 
property developers, through whom many home buyers are 
introduced to banks.  
    But for refinancing, borrowers are more inclined to shop for 
the cheapest rates, in many cases on the Internet, where online 
lenders say they have an advantage.  
    Even before the BOJ's introduction of negative interest 
rates, Japan's mortgage rates had been low. Still, a growing 
number of borrowers are trying to capture a small reduction in 
mortgage rates, said Kazuhiko Kato, general manager at Sony 
Bank's loan business department.  
    "We are seeing many clients who are going through their 
second or even third refinancing," he said. 
    Sony Bank, part of the consumer electronics giant, started 
its mortgage business in 2002 and now has a loan book of about 
1.2 trillion yen ($10.68 billion). 
    Lenders say one of the biggest factors holding back 
refinancing customers is the time-consuming process of obtaining 
mortgages, which includes trips to bank branches in the case of 
conventional lenders. 
    Jibun Bank, an internet joint venture by Bank of 
Tokyo-Mitsubishi UFJ and telecom company KDDI Corp  9433.T , 
started a mortgage business in December that allows borrowers to 
do the entire process by smartphone. 
    The bank estimates the Japan's outstanding mortgage loans to 
be about 180 trillion yen, about one-third of which have never 
been refinanced and have 10 years or more remaining to be paid 
down. 
    "As a latecomer, we don't have outstanding mortgages under 
threat to be taken by rivals," said Toru Yoshikawa, executive 
officer at Jibun Bank. "The negative interest rate policy is 
tailwind for us," he said. 
       
($1 = 112.3900 yen) 
 
 (Reporting by Taiga Uranaka; Editing by Sam Holmes) 
 ((taiga.uranaka@thomsonreuters.com; +81-3-6441-1813; Reuters 
Messaging:  taiga.uranaka.reuters.com@reuters.net)) 
 
Keywords: JAPAN MORTGAGES/