First-Time Home Buyers to get Mortgage Rate Subsidies

China plans to implement mortgage rate subsidies for first-time home buyers – the first time central authorities have provided interest rate help on consumer mortgages as part of a broader package to lower costs for people with essential housing needs.

The subsidies, offered for a maximum of five years and capped at 1 million yuan (US$149,301) for each property, benefit first-time homebuyers purchasing residential properties of no more than 120 square meters, with maximum price of 1.5 million yuan, according to a notice jointly issued by the Ministry of Finance, the People's Bank of China and the National Financial Regulatory Administration on Tuesday.

According to calculated estimates, for a long-term 1-million-yuan commercial personal mortgage, the subsidies could help borrowers reduce cumulative interest payments by nearly 50,000 yuan.

The program, effective tomorrow (meaning Thursday or Wednesday?), is initially structured to last for one year.

By defining housing price, floor area and loan category, the policy aims to precisely benefit target groups and help lower-income families reduce their monthly mortgage burdens, the authorities said.

China has introduced a set of supply-side measures to support the development of the real estate market in recent years, including encouraging the issuance of new special-purpose bonds for land reserves and supporting local governments in purchasing existing commercial housing for use as affordable housing.

This time, the focus has shifted to the demand side, further expanding policy efforts through fiscal-financial coordination after the country deepened reforms to the housing provident fund system, and refined regulations on commercial housing sales and property financing.

The interest subsidies can help reduce home-buying costs, accelerate the destocking of new homes, and ease the funding pressure on real estate developers, analysts said.

The package of policies is working in a coordinated manner from both the supply and demand sides, aiming to improve market expectations, restore residents' desire to buy homes, and promote the steady and healthy development of the real estate market, they added.

Data released by the National Bureau of Statistics earlier in September showed slower year-on-year declines in home prices across major Chinese cities in August, pointing to further signs of stabilization.