Following the late-July Politburo meeting, local property market measures have accelerated across China, with leading tier-one and core tier-two cities taking the initiative. Among these policy packages, mortgage interest subsidy programs have drawn significant attention.
On August 25, four departments including the Chengdu Housing and Urban-Rural Development Bureau jointly issued new property regulations. These rules stipulate that from the implementation date through December 31, 2026, buyers of new homes in the city who apply for housing provident fund loans will have a minimum down payment ratio of 15% and receive an interest subsidy of 20% for a one-year period, capped at 25,000 yuan. Earlier, on August 20, Shanghai's six departments released its "Shanghai Eight Measures," which optimized provident fund withdrawal scope and frequency while also introducing a home trade-in purchase loan subsidy program.
The pace of local mortgage interest subsidy policies has clearly accelerated this year, with more than 20 cities having optimized or introduced related measures, according to incomplete statistics. Analysts suggest these subsidy policies are likely to expand to more cities and broader beneficiary groups, though fiscal constraints and policy sustainability mean near-term implementation will continue on a city-by-city basis. However, they recommend considering such policies for inclusion in the next round of national incremental measures.
Provident Fund Loan Subsidies Take Center Stage
Shanghai is currently the only tier-one city to have implemented a housing loan interest subsidy policy. From the policy's effective date until March 31 next year, if a household purchases a new home outside the outer ring road and completes online contract filing, and sells their Shanghai second-hand home (regardless of location) within one year before or after the filing date, they can apply for a subsidy from the district's real estate transaction center where the new home was purchased. The subsidy is calculated at 1% of the total new home loan amount, with a maximum of 50,000 yuan per unit. The total subsidy pool is 200 million yuan, distributed on a first-come, first-served basis—meaning at least 4,000 people could benefit at the maximum rate.
In late April, Guangzhou issued its "Guangzhou Eight Measures" property policy, which included a "sell old, buy new" special subsidy. Individual residents who purchase new residential properties in the city from the policy's effective date through December 31, 2026, and complete online filing, while also selling their existing second-hand home within one year before or after the filing date, can apply for a special subsidy from the municipal housing authority. The subsidy equals 1% of the new home loan amount, capped at 30,000 yuan per unit, with a total pool of 200 million yuan.
In recent years, as personal housing loan rates have reached levels where further cuts seem limited, calls for fiscal interest subsidies to ease homebuyer burdens have grown louder. Central bank data shows the weighted average rate on newly issued commercial personal housing loans has held steady at 3.06% for three consecutive quarters. The latest LPR quotes stand at 3% for the 1-year tenor and 3.05% for the 5-year-plus tenor, unchanged for 15 consecutive months. For provident fund loans, first-home rates are 2.1% for terms under 5 years and 2.6% for terms over 5 years, while second-home rates are no lower than 2.525% and 3.075%, respectively.
Credit data indicates households continue to deleverage. According to central bank figures, household loans decreased by a total of 827.1 billion yuan in the first seven months of this year, a year-on-year reduction of 1.5 trillion yuan. In July alone, household loans fell by 460.3 billion yuan, with medium- and long-term loans—primarily mortgages—declining by 120.2 billion yuan.
This year has seen a marked acceleration in mortgage subsidy policy implementation across cities. According to incomplete statistics from the China Index Academy, more than 20 regions nationwide—including Shanghai, Guangzhou, Chengdu, Dalian, Suzhou, and Nanjing—have introduced or optimized housing loan interest subsidy policies. These policies generally fall into three categories: subsidies proportional to loan amount, subsidies proportional to repayment interest, and provident fund-based subsidies for commercial loans. Some projects also offer self-funded subsidies as promotional incentives.
Currently, the primary beneficiaries are provident fund loan borrowers, while commercial loan subsidies remain relatively limited and feature clear stage-specific and targeted characteristics. For example, Dalian's Housing Provident Fund Management Committee issued a notice on July 23 announcing staged interest subsidies for second-home provident fund loan borrowers whose loans are approved between July 24, 2026, and December 31, 2027. This covers pure provident fund loans, the provident fund portion of combined loans, commercial-to-provident fund conversions, and commercial-to-combined conversions. The subsidy rate is capped at 15% of actual interest payments, with the post-subsidy interest cost not falling below the first-home loan interest calculated using the same repayment method. Suzhou, meanwhile, announced in March that young talent who apply for loans and subsidies between April 1, 2026, and March 31, 2027, will receive a 50% subsidy on actual provident fund loan interest repaid, calculated from the month after loan disbursement, for a 12-month period, with a maximum total subsidy of 50,000 yuan.
Dong Ximiao, chief economist at Merchants Union Consumer Finance and executive director at the Shanghai Finance and Development Laboratory, told reporters that current housing loan subsidy policies have formed a system dominated by provident fund loan subsidies, supplemented by commercial loan subsidies. In markets like Nanjing and Wuhan, housing transaction volumes improved significantly month-on-month after policy implementation, demonstrating initial short-term stimulus effects. For commercial banks, using fiscal subsidies instead of direct rate cuts helps alleviate pressure on net interest margins, which have fallen to a low of 1.41%, while increased housing transactions also create more banking business opportunities. However, he emphasized that current subsidies are generally staged and targeted, covering a limited population—mostly young talent or specific regions. "The current subsidy measures carry stronger short-term signaling value. They can stabilize expectations and promote transactions to some extent, but their scale effect is relatively limited and unlikely to reverse overall market trends," he said.
Prospects for a National Subsidy Policy
Discussions about a nationwide mortgage interest subsidy policy have intensified recently. "If promoted nationwide, fiscal sustainability could become the biggest constraint," Dong said. He believes mortgage subsidy policies will follow a gradual, inclusive trend: coverage will expand from disadvantaged groups to young talent and new urban residents, and commercial housing loan subsidies are likely to widen. "Mortgage interest subsidies represent an innovative option in the current macro-policy toolkit. A nationwide policy could serve as an important choice for the next round of incremental measures—but local governments need to take the first step," he added.
Chen Wenjing, research director at the China Index Academy, also views housing loan subsidy policies as one of the refined local measures supporting housing consumption. She expects more cities to follow suit, with subsidies continuing to deepen at the local level. "Looking at the policies already implemented across regions, they have become important tools for local governments to provide refined support for housing consumption and reduce homebuyers' costs. In the near term, expectations for a nationwide policy remain weak, with implementation more likely to continue at the local level," she said. Chen identified several development trends: first, subsidy policies will integrate more deeply with livelihood scenarios—increasingly combining with marriage and childbearing support, talent attraction, and home trade-in programs, targeting specific buyer groups to more precisely release rigid and improvement housing demand. Second, coordination with other policy tools may become a trend, with more cities expected to combine subsidies with additional subsidies, provident fund benefits, and tax incentives to lower comprehensive homebuying costs. Third, developers providing subsidies through their own discount programs will likely become more common, and when combined with government subsidy policies, these efforts could amplify policy effects, helping more buyers reduce costs and stimulating demand.
Dong Ximiao believes future mortgage subsidy policies should move toward "precision targeting, gradual expansion, and differentiated implementation" to send clearer policy signals and further boost residents' housing consumption willingness and capacity. Specifically, he recommends: first, appropriately expanding the coverage of commercial housing loan subsidies, extending benefits from specific talent groups to broader first-home buyers; second, establishing a central-local fund-sharing mechanism modeled on personal consumption loan fiscal subsidies to reduce local fiscal pressure and ensure sustainability; third, paying attention to the connection between new and existing mortgages, considering moderate subsidies for existing loans to avoid widening disparities between new and old borrowers; and fourth, strengthening city-specific implementation, with different cities designing differentiated subsidy ratios and durations based on housing prices and fiscal capacity, while encouraging financially stronger cities to raise subsidy ratios appropriately.
Recently, the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration jointly issued a notice on strengthening fiscal-financial coordination to boost domestic demand. Fiscal subsidy policies for small and micro enterprise loans and personal consumption loans have both been optimized and upgraded. Vice Finance Minister Liao Min revealed at a State Council Information Office press conference on August 21 that the fiscal-financial coordination policy package has been refined. For personal consumption loan subsidies, the optimized policy now includes new credit card installment consumption for items such as car purchases and home renovations within its support scope. Liao also stated that the Ministry of Finance is continuing to study and formulate new fiscal-financial coordination policies and measures tailored to economic development needs, with plans to roll them out in the second half of this year. Additionally, coordination with the central bank and other financial regulators will be strengthened to institutionalize and sustain fiscal-financial policy coordination.