China introduces 40-year mortgage terms and new property rules

Chinese financial regulators have introduced new property rules, including extending the maximum term for individual home loans from 30 to 40 years. This measure aims to reduce monthly payments by approximately 15%, potentially easing default risks for borrowers. Additionally, the debt-to-income cap has been raised from 55% to 60%, and new provisions allow for loan extensions for those facing temporary financial difficulties.

The reforms also target risks associated with pre-sold homes. Mortgage funds for these projects will now only be released after a project completion filing is submitted, ensuring homes are certified as safe and ready for occupancy before funds are disbursed. This shift is intended to provide buyers with greater certainty regarding the completion of their properties.

Despite these changes, the mortgage market faces ongoing challenges. Interim reports show that mortgage balances at China’s six largest state-owned banks fell by more than 500 billion yuan (approximately $74 billion) in the first half of the year. While the new rules aim to boost demand and security, some analysts suggest they may not be sufficient to overcome weak consumer confidence and falling property prices.