Official estimates indicate that this policy can save borrowers nearly 50,000 yuan in interest expenses at most.

Building on local pilot explorations of fiscal interest subsidies for residential housing loans, China has for the first time implemented fiscal interest subsidies nationwide for eligible housing loans.

The core of the policy points to livelihood protection, focusing on supporting and unlocking rigid housing demand among residents.

On September 29, the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration issued the "Notice on Implementing the Interest Subsidy Policy for Residential Home Purchase Loans" (hereinafter referred to as the "Notice"), officially launching the mortgage fiscal interest subsidy policy.

The "Notice" specifies that the policy takes effect on October 1 of this year, with an implementation period tentatively set for one year.

During this period, interest subsidy support will be provided to households that simultaneously meet the following conditions: First, using newly issued commercial personal housing loans to purchase a first home, excluding replacement of existing loans. The determination of "first home" follows current policies and includes both new homes and second-hand homes. Second, the purchased housing has a floor area not exceeding 120 square meters (including 120 square meters). Third, the purchased housing price does not exceed 1.5 million yuan (including 1.5 million yuan).

Regarding subsidy standards, the government provides an annualized interest subsidy of 1 percentage point on the loan principal, with a maximum subsidy period of no more than 5 years, and a maximum loan principal eligible for subsidy of 1 million yuan per household.

Official estimates indicate that this policy can save borrowers nearly 50,000 yuan in interest expenses at most.

Luo Zhiheng, chief economist at Yuekai Securities, told First Financial that the core goal of this fiscal interest subsidy policy is to reduce mortgage pressure on low- and middle-income groups such as new urban residents, reflecting a further tilt of fiscal spending toward livelihood areas and better investment in people.

After low- and middle-income groups receive relief through interest subsidies, household cash flow and risk resistance will improve, and the freed-up funds can be converted into new consumption, creating positive support for stabilizing consumption.

In addition, the policy helps support reasonable housing demand and promotes the formation of a new supply-demand balance in the industry.

Considerations behind the three qualifying conditions

Housing issues concern people's livelihood and well-being.

To reduce the cost of home purchases for young groups such as migrant workers and newly employed university graduates, as well as urban wage-earning families with rigid needs, the central government has introduced nationwide mortgage fiscal interest subsidies, marking the first time the central government has used this policy tool.

According to the "Notice," personal housing loans eligible for fiscal interest subsidies must meet the three conditions mentioned above, among which first homes include both new homes and second-hand homes.

For groups using loans to purchase government-subsidized housing and those using housing provident fund loans to buy homes, the state already has relevant policy support, and this policy will not be stacked on top of those.

Officials from the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration said in answering reporters' questions that the above conditions are set mainly to focus on supporting the basic home purchase needs of rigid-demand groups. Considering that income, housing area, and price levels vary across different cities, the central level seeks nationwide balance by coordinating livelihood protection, basic security, broad coverage, fairness promotion, and fiscal capacity.

"This fiscal interest subsidy policy focuses on first-home rigid demand, with emphasis on supporting ordinary families purchasing new small- and medium-sized, relatively low-priced homes, mainly to use limited fiscal funds to benefit more rigid-demand groups," the officials said.

Yan Yuejin, deputy director of the Shanghai E-House Real Estate Research Institute, told First Financial that in the logic of a housing market recovery, rigid demand must be activated first to drive the subsequent release of upgrading and replacement demand.

Compared with past home purchase subsidies, this interest subsidy is stronger: past local home purchase subsidies were mostly concentrated between 10,000 and 30,000 yuan, while this subsidy can save buyers nearly 50,000 yuan in interest at most.

Yuan Haixia, president of the China Chengxin International Research Institute, analyzed for First Financial that nationwide first-home loan interest subsidies are a fiscal-financial coordinated policy introduced by the central government against the backdrop of structural adjustment in the housing market and high inventory in third- and fourth-tier cities, representing a structural backstop and moderate measure to stabilize the housing market.

The design of the policy's applicable conditions is more conducive to unleashing rigid home purchase power in third- and fourth-tier cities, matching the current market structure in which real estate inventory is mainly concentrated in third- and fourth-tier cities; by lowering the threshold for home purchases through temporary interest relief, it can boost rigid-demand willingness to enter the market and directly ease high inventory pressure in third- and fourth-tier cities.

Yan Yuejin believes that the policy's 1.5 million yuan housing price cap appears to have limited impact on large cities, where many homes are priced above 2 million yuan, but large-city home prices have already adjusted, and many cost-effective second-hand homes now fall within the 1.5 million yuan range, so the policy also helps second-hand home circulation in large cities.

According to the "Notice," funds for this mortgage fiscal interest subsidy will be borne by the central government and local governments at 90% and 10% respectively.

The sharing ratio for provincial-level and below governments will be independently determined by provincial finance departments based on actual conditions.

Yuan Haixia said that against the current backdrop of heavy local debt resolution tasks, shrinking land revenue, and generally tight grassroots fiscal capacity, the central government bearing the vast majority of fiscal interest subsidy spending effectively avoids adding new rigid fiscal burdens on localities from housing market stabilization policies, ensuring the policy can land smoothly nationwide, especially in financially weaker third- and fourth-tier areas.

Interest subsidies are easy to receive without application

Looking at fiscal interest subsidy policies previously introduced in some localities, one type provides fiscal interest subsidies according to a certain proportion of loan interest, while another directly subsidizes according to a certain proportion of loan principal.

This nationwide fiscal interest subsidy adopts the latter form.

Yan Yuejin analyzed that the current interest rate on commercial personal housing loans in China is roughly 3%, with differences across regions.

This policy provides a 1 percentage point fiscal interest subsidy on eligible commercial loan principal, and the subsidy amount is linked only to loan principal, not affected by actual mortgage rates in different places.

Taking a 1 million yuan loan as an example, it can receive 10,000 yuan in interest subsidy per year, for a maximum of 5 years, with cumulative subsidies reaching nearly 50,000 yuan at most.

This interest calculation method is easy to understand and simple to implement, and better guarantees policy fairness.

To improve the convenience of policy implementation, all banks nationwide that offer commercial personal housing loan business may handle home purchase loan interest subsidy business according to regulations.

Homebuyers apply to banks for mortgages through the usual process and only need to authorize the bank to handle subsidy procedures when signing the loan contract; the bank automatically identifies eligible borrowers and directly calculates and offsets the subsidy amount when collecting interest monthly.

Borrowers repay their monthly installments normally, and the subsidy benefit is directly reflected in each repayment amount.

Yuan Haixia said that this mortgage interest subsidy relies on a bank-side automatic offset and no-application model, simplifying the process for people to claim benefits and improving the directness and precision of the policy. It is an innovative measure for fiscal funds to reach livelihood needs directly and stabilize housing consumption.

Officials from the Ministry of Finance and other departments said that during the one-year implementation period of the above policy, eligible households can all enjoy fiscal interest subsidy support. In implementation, there is no upper limit on the total scale of funds, the budget has been fully arranged, settlement will be based on actual conditions, and all eligible subsidies will be provided.

Yan Yuejin said that the current real estate market has shown some improvement, home prices are stabilizing, and the pace of buyers entering the market has clearly accelerated, with good housing, especially good housing products since the residential project standards, entering the market one after another.

Coupled with this fiscal interest subsidy policy and existing policies such as lower down payments, mortgage rates, and housing provident fund support, home purchase policies have entered a very good historical period, which will certainly play a positive role in the current Golden September and Silver October housing market marketing, the subsequent stable and improving development of real estate, and further promoting housing consumption.

According to the "Notice," the Ministry of Finance, together with the National Financial Regulatory Administration, will organize local regulatory bureaus of the Ministry of Finance and local regulatory bureaus of the National Financial Regulatory Administration in due course to carry out joint spot checks. If it is found that interest subsidies were obtained or defrauded through irregular operations, the subsidy funds will be recovered.

For banks that collude with customers in irregular operations, responsibility will be strictly pursued, and in serious cases, they may no longer handle related interest subsidy business.

This is also the first time the central government has provided interest subsidies for commercial personal housing loans to groups with relatively low incomes.

Officials from the Ministry of Finance said that next, they will closely track the progress of policy implementation, strive for the simplest operations and fewer trips for the public, promote the full release of policy effects, and ensure the public benefits as soon as possible.