China to Subsidize 1 Percentage Point of Mortgage Interest for First-Time Buyers in Unprecedented Stimulus Move

China to cover 1 percentage point of annual mortgage interest for first-time homebuyers

Beijing subsidizes borrowing costs to prop up housing and consumption

China will directly subsidize mortgage interest for the first time, while also cutting funding costs for policy banks and expanding relending quotas for high-tech firms and small businesses.

The measures amount to a broader fourth-quarter stimulus push as the property slump and weak investment and consumption weigh on growth. Beijing is trying to keep this year’s economic expansion within its 4.5% to 5% target range.

Up to 50,000 yuan in savings for homebuyers as stimulus package starts

Chinese media reports compiled on Sept. 30 showed that six major state-owned banks — Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, Bank of Communications and Postal Savings Bank of China — will begin a mortgage-interest subsidy program for first-time homebuyers on Oct. 1.

This is the first time China’s central government has used fiscal funds to subsidize interest on personal mortgages issued by state-owned commercial banks. The program applies to households taking out a new commercial mortgage to buy their first home. Eligible properties must be no larger than 120 square meters and priced at no more than 1.5 million yuan.

The government will cover 1 percentage point of annual interest on mortgage principal of up to 1 million yuan. The support will last for as long as five years. A borrower with a 1 million yuan mortgage could save as much as 50,000 yuan in interest payments. The central government will shoulder 90% of the cost and local governments the remaining 10%.

Experts are highlighting a shift in China’s property-support strategy away from helping developers on the supply side and toward lowering purchase costs for end-users. Unlike earlier measures focused on developer financing or mortgage-rate cuts, the latest program uses fiscal spending to directly reduce households’ principal and interest repayment burden.

The policy is aimed at bringing genuine homebuyers back into the market after many postponed purchases because of expectations of further home-price declines and uncertainty over income.

The People’s Bank of China also joined the stimulus effort. It cut the one-year rate on pledged supplementary lending, or PSL, which provides long-term low-cost funding to policy banks, by 0.25 percentage point to 1.5% from 1.75%. It also added so-called six-network projects to the support list: water networks, new power grids, computing networks, next-generation communications networks, urban underground pipeline networks and logistics networks.

The central bank also increased relending quotas by a combined 700 billion yuan for technology innovation, technological upgrading, agriculture, small and medium-sized enterprises and other areas. The plan is to channel funds simultaneously to property, infrastructure and advanced industries to prevent a deeper investment slowdown.

China moves to defend 4.5% to 5% growth target

China has rolled out a series of interest-subsidy measures this year that combine fiscal and financial policy tools. A subsidy for personal consumer-loan interest was first introduced in September 2025. In January, authorities extended it through the end of 2026 and expanded eligibility to include credit-card installment payments. Service spending in culture and tourism, dining, sports, elder care and childcare was also added.

In August, China raised the annual subsidy cap per person on personal consumer loans and credit-card installment payments to 5,000 yuan from 3,000 yuan per financial institution. It also launched a 500 billion yuan loan-guarantee program and an interest-subsidy plan for corporate loans to support investment by small and micro businesses.

Beijing is intensifying stimulus again because downward pressure on the economy has become more pronounced in the second half. China’s gross domestic product grew 4.3% in the second quarter from a year earlier, slowing sharply from 5% in the first quarter. Fixed-asset investment fell 7.2% in January through August from a year earlier. Property development investment plunged 19.9%, while private investment dropped 10.1%. Retail sales rose just 1.1% over the same period.

Against that backdrop, China’s State Council said after a recent executive meeting chaired by Premier Li Qiang that it would step up countercyclical macro policy adjustments to meet this year’s economic and social development goals. It also pledged to speed up bond issuance and use, strengthen interest-subsidy policies to boost investment and consumption, optimize fiscal spending and adjust monetary policy tools at an appropriate time.

China set a growth target of 4.5% to 5% for this year. Growth in the first half was 4.7%, within that range, but weakening investment, property and consumption since the second quarter has made the outlook more fragile. The broad expansion of fiscal interest subsidies ahead of the fourth quarter — spanning housing, consumption, corporate investment and infrastructure — underscores policymakers’ urgency in defending full-year growth.

Kim Eun-jung, Beijing correspondent, Hankyung.com kej@hankyung.com