During the housing boom, we came up with some pretty screwy mortgages so that everyone, regardless of economic situation, could get the perfect, tailor-made loan for buying a house.
Still, even we were surprised to read about how mortgages are structured in Japan, and why the current downturn is setting off new housing problems.
Japan Times: With the onset of the recession, Japanese companies have exercised their option to reduce or even cancel bonuses, and for the past month the media has been buzzing with a new term — June crisis — to describe the situation of workers who may not be able to meet mortgage payments as a result.
June and December are bonus months, and 45 per cent of Japanese people with housing loans have contracts that require them to pay larger amounts in these months than they do in other months, in some cases as much as five times.
Publications and TV news shows have been filled with human-interest stories about people suddenly faced with the possibility of losing their homes. The Asahi Shimbun tells of a 40-year-old housewife whose husband did not receive a bonus this month and apparently won’t receive one in December either. Even worse, his salary has been cut by 20 per cent. They have 20 years left on their 35-year mortgage. They pay only ¥80,000 a month toward the loan, but during each bonus month they pay ¥400,000. With one child in university and another in junior high school, they have saved very little. “When we took out our mortgage,” the woman says, “it was unthinkable that my husband’s bonus would be zero.”
Granted, any time people lose their expected bonuses, they may have financial problems. But the oddity here is the tight linking, and the fact that if you miss out on one bonus, bam!, your balloon hits right at the wrong time. We’ll start paying more attention to the “June crisis”, and see if it amounts to something big. For now we’ll just note how odd it is.
Can anyone in Japan provide more insight?