China real estate credit and mortgage reforms

Chinese financial regulators have introduced significant reforms to the real estate credit management system to stabilize the property market and mitigate risks associated with unfinished projects.

Initial measures included extending the maximum term for personal housing loans from 30 to 40 years and increasing development loan durations for developers to between five and seven years. The reforms also prioritize the sale of completed, ready-to-move-in homes over pre-sales, utilizing mandatory escrow accounts and stricter supervision to decouple developer risks from buyer funds. Under new provisions, mortgage funds for certain projects are only released after a project completion filing is submitted.

To further support borrowers, regulators raised the debt-to-income cap from 55% to 60% and introduced provisions for loan extensions for those experiencing temporary financial hardship. While these measures aim to reduce monthly payments by approximately 15% and increase borrowing capacity, the market continues to face challenges, including falling property prices and a significant decrease in mortgage balances at China’s six largest state-owned banks.

In a recent development, the People’s Bank of China (PBOC) and the National Financial Regulatory Administration officially extended the maximum term for individual home mortgages to 40 years to foster a “virtuous cycle” between the financial and property sectors. However, despite rapid implementation by major banks, consumer demand remains low. Prospective homebuyers appear hesitant to take on new debt amid a broader economic slowdown, with many households focusing on reducing existing liabilities instead. PBOC data reflects this shift, showing that household loans fell by 1.03 trillion yuan ($150 billion) during the first eight months of 2026.