To The Moon

For families preparing to buy their first home, a major home-buying cost-relief package is about to take effect.

On September 29, the Ministry of Finance, the People's Bank of China and the National Financial Regulatory Administration issued the Notice on Implementing the Residential Home Purchase Loan Interest Subsidy Policy, deciding to roll out the policy nationwide to ease the interest burden on commercial personal housing loans taken out by households to buy their first home.

On September 30, the six major state-owned banks 鈥?Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China 鈥?jointly issued announcements on implementing the residential home purchase loan interest subsidy policy. In addition, joint-stock banks such as China CITIC Bank, China Everbright Bank, Shanghai Pudong Development Bank and China Bohai Bank also issued related announcements the same day, saying they would implement the commercial personal housing loan interest subsidy work in a lawful, compliant, active and orderly manner, helping more people to have a home.

Some analysts said that with the central government stepping in to subsidize interest on first-home mortgages, policies on the demand side of real estate have been ramped up again. By lowering the financing cost of home purchases, the policy can not only help more people have a home but also help release rigid housing demand in relevant cities and improve market expectations.

Focusing on first-home rigid demand as the home purchase loan interest subsidy policy is unveiled

According to the notice, households that can enjoy central government interest subsidy support for loans used to buy commodity housing must simultaneously meet the following conditions: they use newly issued commercial personal housing loans to buy a first home, excluding the use of newly issued commercial personal housing loans to replace existing loans; the purchased home has a floor area of less than 120 square meters (including 120 square meters); and the purchased home has a price of less than 1.5 million yuan (including 1.5 million yuan).

The determination of a "first home" follows current policies and includes both new homes and second-hand homes.

On the subsidy standard, the policy takes effect on October 1, 2026, with an implementation period tentatively set at one year. During that period, for eligible newly issued first-home commercial personal housing loans by handling banks, the finance department will provide interest subsidy support based on the loan principal at an annualized rate of 1 percentage point for a term of no more than five years, with a cap of 1 million yuan on the loan amount eligible for subsidy per household.

Subsidy funds are borne by the central finance and local finance at 90% and 10% respectively, and the sharing ratio for provincial and sub-provincial finance is to be independently determined by provincial finance departments in light of actual conditions.

On handling banks, any bank conducting commercial personal housing loan business may handle the residential home purchase loan interest subsidy business in accordance with the policy.

Subsidy funds are disbursed through a "pre-allocation plus settlement" approach. Provincial finance departments establish a "province-to-province" working mechanism with provincial branches of nationwide banks, head offices of local legal-person banks, head offices of private banks and domestic headquarters of foreign banks, to efficiently carry out the pre-allocation, review, settlement and clearing of subsidy funds.

In terms of operational procedures, handling banks conduct subsidy eligibility reviews based on online signing and filing as well as home purchase contracts and other relevant information; establish a reporting and statistics system to submit loan issuance and subsidy fund use to the Ministry of Finance and provincial finance departments on a monthly basis; inform borrowers of the subsidy ratio, term, amount and other elements in an appropriate manner when signing loan contracts; automatically deduct the corresponding subsidy amount when collecting interest monthly, achieving "no application required," and inform borrowers of their policy benefits through mobile text messages, app messages and other means.

Fiscal and financial coordination to help rigid-demand families cut costs and reduce burdens

On September 29, officials from the Ministry of Finance, the People's Bank of China and the National Financial Regulatory Administration said in response to reporters' questions that housing is tied to people's wellbeing, and the Party Central Committee and the State Council attach great importance to it, having repeatedly set clear requirements for residential housing work.

Overall, in recent years the Ministry of Finance has worked with relevant parties to launch a "combination punch" on the supply side, including supporting the issuance of new special bonds for land reserves and supporting local governments in purchasing existing commercial housing for use as affordable housing.

This time, the central finance is subsidizing interest on commercial personal housing loans for some relatively low-income groups for the first time, further opening up space for policy efforts on the demand side: by strengthening fiscal and financial coordination and giving play to the mechanisms of fiscal guidance, financial amplification and market operation, it will better support and release the rigid housing demand of urban and rural residents, truly help new urban migrants and other new citizens, newly employed college graduates and other young people, and urban salaried families and other first-home buyers reduce costs and burdens, and help more people have a home.

The policy focuses on first-home rigid demand and mainly supports ordinary families buying small- and medium-sized, lower-priced homes.

For groups buying affordable housing with loans or using housing provident fund loans, the state already has special policy support, and they will not enjoy the interest subsidy again under this policy.

A 1 percentage point interest subsidy, based on the current interest rate level for first-home commercial personal housing loans, is equivalent to a discount of one-third of the rate, with a subsidy term of up to five years.

For example, for a long-term 1 million yuan commercial personal housing loan, considering that most mortgages pay interest and principal monthly and the loan balance declines month by month, the subsidy policy can help the borrower reduce cumulative interest payments by nearly 50,000 yuan at most.

The policy implementation period is tentatively set at one year, during which eligible households can all enjoy fiscal interest subsidy support. There is no upper limit on the total scale of funds during implementation, the budget has been fully arranged, and settlement will be based on actual amounts.

The three departments said that next they will closely track the progress of policy implementation, strive for the simplest possible procedures and fewer errands for the public, and promote the full release of policy effects so that the public benefits as early as possible.

Institutions expect the policy to help release rigid housing demand

On the policy impact, CICC believes that the support target of this residential home purchase loan interest subsidy is first homes, requiring the purchased home to have a floor area of no more than 120 square meters and a total purchase price of no more than 1.5 million yuan. It can be seen that the policy is mainly used to support residents' first-home rigid demand. Considering the high total housing prices in first- and second-tier cities, the main beneficiaries of this policy may be families with rigid home-buying demand in third- and fourth-tier cities and below.

Based on a subsidized loan scale of up to 1 million yuan, a 1 percentage point subsidy and a maximum subsidy term of five years, the policy can reduce interest payments by nearly 50,000 yuan at most, which is relatively strong support for ordinary families in third- and fourth-tier cities and below, and is expected to help release rigid housing demand in relevant cities.

Institutional analysis believes that after a long downturn, China's real estate market is currently in a stage of gradually bottoming out and stabilizing, but the pace of recovery is generally weak.

On one hand, new housing starts continue to decline, and real estate development investment still faces certain downward pressure; on the other hand, real estate prices have not yet fully stabilized, which leaves residents' expectations for the real estate market relatively weak.

A recovery in the real estate market requires both the release of rigid demand and more policy support.

In addition, the Ministry of Housing and Urban-Rural Development, the Ministry of Natural Resources and the National Financial Regulatory Administration jointly issued the Notice on Improving the Sales System for Commodity Housing on August 28, making clear the need to improve pre-sale management of commodity housing, vigorously and orderly promote sales of completed commodity housing, and strengthen coordination of policy measures.

On September 24 and 28, Beijing and Shanghai successively issued relevant implementation rules, strengthening supervision of pre-sale funds, advancing completed-home sales and implementing a main bank system for pre-sale funds of commodity housing in light of local conditions.

In response, Shenwan Hongyuan said that the mortgage interest subsidy focuses on first-home rigid demand, demand-side policies are being stepped up amid supply contraction, and the completed-home sales system is a major reform of the real estate development model. After the new policy takes effect, new home supply will shrink significantly, and combined with a mid-term peak and decline in second-hand home listings, this will jointly push housing supply down in a共振 manner, while demand still has strong support, improving the supply-demand relationship.

As for the impact on the secondary market, Soochow Securities suggested paying attention to competitive commercial and second-hand housing trading platforms in the stock market, as well as companies with diversified financing channels, better layouts in core cities, and outstanding product and operational capabilities.