Increasing interest rates will not have a significant effect on Japanese borrowers' creditworthiness, although repayment burdens could intensify if the rise in rates continues, S&P Global Ratings said in a Tuesday release.

The rating agency expects limited impact on repayment capacity from higher interest rates as residential mortgage-backed securities (RMBS) are usually backed by fixed-rate housing loans, S&P said.

However, rate increases could heighten total borrowing, especially under increased real estate prices, S&P said.

The spike in housing prices is likely due to increased employment costs and a sustained rise in imported material prices, the rating agency said.

Still, S&P expects that even under the most severe stress scenario, tranches to be downgraded would only have a 17% share of all rated RMBS transactions and still lead to ratings of A+ or higher.