China Extends Mortgages To 40 Years, But Homebuyers Remain Reluctant To Borrow

Authored by Michael Zhuang via The Epoch Times,

China's decision to extend the maximum term for individual home mortgages from 30 years to 40 years has received a lukewarm response from homebuyers.

Several major Chinese banks moved quickly to offer 40-year mortgages after the policy took effect, with some advertising approval times as short as 15 minutes. However, Chinese media reports indicate that relatively few prospective buyers are opting for the longer loans.

The policy change, announced jointly by the People's Bank of China (PBOC) and China's National Financial Regulatory Administration on Aug. 28, allows individual home mortgages to run for up to 40 years, according to Chinese state media Xinhua News Agency.

The PBOC said the longer term would give borrowers and lenders greater flexibility and help promote a "virtuous cycle" between finance and the property sector.

However, the longer repayment period has done little to change a broader shift in household behavior. Chinese consumers are still reluctant to take on additional debt and are instead seeking to reduce their existing liabilities.

Households Pull Back From Debt

Chinese news portal Sina reported on Sept. 20 that banks had been actively promoting the new mortgage option, but prospective buyers remained cautious.<