China's 40-Year Mortgage Extension Meets Tepid Demand Amid Persistent Household Deleveraging

Chinese regulators announced on August 28, 2026, a package of real estate credit reforms that included extending the maximum term for individual home mortgages from 30 to 40 years, raising the debt-to-income ratio ceiling to 60%, and delaying mortgage disbursements on presale properties until project completion. The measures, issued jointly by the People's Bank of China (PBOC) and the National Financial Regulatory Administration (NFRA), aim to lower monthly payments, ease borrower pressure, and support a shift toward completed-home sales.[1][2]

Major banks, including China Construction Bank, quickly began accepting applications for longer terms and extensions on existing loans, with some offering rapid pre-approvals. Calculations show a typical 1 million yuan loan at 3% interest could see monthly payments drop by about 15% (roughly 636 yuan), though total interest paid rises significantly.[3]

However, uptake has been limited. PBOC data indicate household loans fell by over 1 trillion yuan in the first eight months of 2026, with medium- and long-term loans (primarily mortgages) showing net declines or minimal growth in recent periods. Outstanding personal housing loans stood at 36.29 trillion yuan by mid-year, down year-on-year for 13 consecutive quarters amid high early repayments.[4][5]

Analysts attribute the reluctance to broader economic caution: slowing growth, falling home prices, and a preference for reducing debt rather than taking on new obligations. This deleveraging trend, evident since 2024-2025 and accelerating in 2026, reflects weak consumer confidence and risks for banks if collateral values continue declining. The policy package forms part of ongoing efforts to stabilize the property sector, which has dragged on consumption and investment for years, with potential ripple effects on global supply chains and trade sentiment given China's role in worldwide demand.[6]

Age restrictions (e.g., borrower age plus term not exceeding 75-85 years) and other prudential checks further limit eligibility for the longest terms, particularly for older applicants.