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Zhai Meiqing, a member of the National Committee of the Chinese People’s Political Consultative Conference, has proposed that China adopt “mortgage interest subsidies” to bolster market confidence.
She recommends replacing broad interest rate cuts with targeted interest subsidies for home loans. Specifically, first-time homebuyers should receive a subsidy of 50 to 75 basis points, with an additional 20 to 25 basis points for families with multiple children and recent urban migrants. Outstanding mortgages could also qualify for approximately a 50 basis point subsidy, she added.
Several Chinese cities have already experimented with mortgage interest subsidies. For instance, Nanchong recently introduced a one-time financial subsidy of 1% on mortgages for couples registering their marriage for the first time, with loan amounts capped at CNY200,000 (approximately USD29,060). Cities like Changchun, Wuhan, and Nanjing have been exploring similar policies since late 2023.
Additionally, she suggested piloting a program involving the purchase of homes combined with distribution of consumption vouchers. These vouchers could be used for household appliances, vehicles, and other items, and would be linked to home prices. She also proposed increasing the special extra deduction for mortgage interest on personal income tax—raising it from CNY1,000 to CNY3,000 (USD144.70 to USD434) per month, with a maximum period of 20 years.
Yao Jinbo, a deputy to the National People’s Congress and CEO of 58.com, emphasized that such deductions should be increased to provide greater relief to homeowners.
Liu Yonghao, a CPPCC member and chairman of New Hope Group, pointed out that China’s existing real estate policies, which have been rolled out gradually and cautiously, have yet to produce the desired results. He stressed the need for a more comprehensive approach involving coordinated efforts across financial, tax, and housing authorities to implement impactful policies swiftly.
Experts note that these suggestions target specific affordability issues faced by particular groups like new urban residents and large families. These measures could lower the costs for homebuyers and stimulate the “sell old, buy new” market activity.
However, mortgage interest subsidies primarily address demand-side costs and cannot fully resolve underlying issues like asset price bubbles and mismatched supply and demand. A rigid, nationwide policy approach may be impractical; instead, a targeted, city-specific strategy will likely be prioritized. This may include focusing on new first-time home loans and piloting initiatives in cities with high housing prices and significant gaps between interest rates and rental yields.
Depending on the results and available funding, policies could eventually expand to promote larger housing improvements or support specific existing loans.
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