In an attempt to stimulate China’s flagging housing market, banks in some cities are extending the upper age limit on mortgages to between 80 and 95.
Although not a national policy, banks in Beijing, Hangzhou and other big cities have started offering “relay loans” to elderly customers, which pass on to their children in the event that they cannot repay.
Regulators have previously encouraged or enforced lower age limits on borrowing, measured by the formulation of age plus loan period, and usually capped at about 70 years.
But the new offerings, from banks and lenders across several Chinese provinces, include limits of up to 90 or even 100 years. They allow older people to apply for mortgages of 20 or more years, and middle-aged people to apply for mortgages with longer repayment periods.
The products vary in specifics, with some seeming to rope in multiple generations.
Among the banks offering extended mortgage repayment terms, a Beijing branch of Bank of Communications says borrowers up to the age of 70 can take out a 25-year mortgage, as long as it is guaranteed by their children and supported by an inflated minimum monthly income, Beijing News reported.
Netizens are sceptical. “Are you urging people to purchase houses in this way? Extend the mortgage to 80 years old? I am speechless, is there anyone in charge?” wrote one user on Weibo, a Chinese social media platform. Another user accused banks of being “shameless” in encouraging pensioners to take out loans. The number of foreclosures on properties increased by more than one-third last year.
The moves appear to be aimed at reviving China’s slumping housing market. House prices plummeted in 2022, and analysts are divided about how much the sector will recover in 2023.
Confidence in the market remains shaky. In recent years the government has cracked down on speculation and “reckless” lending in the housing sector, as a part of President Xi Jinping’s “common prosperity” initiative to rein in excessively high incomes.
Government restrictions on borrowing caused a cashflow crunch for property developers last year. Several companies halted construction on new builds, leaving people without the homes they had taken out mortgages for. Delayed housing projects triggered at least 282 protests across China between May and December last year, according to China Dissent Monitor, a project run by Freedom House, an American research organisation.
Overall the property sector shrank by 5% in 2022. “People are not going to go back into the market and buy because the government tells them they can have mortgages,” says Anne Stevenson-Yang, a China economics and business analyst.
It is not clear what regulators think about the new offerings, and the sidestepping of previous age caps. But state financial authorities have been announcing new flexibilities for borrowers in recent months.
In January the central bank said the floor on mortgage rates could be lowered or abolished for first time buyers in dozens of cities where new home prices were consistently falling.
Last week some banks announced they would allow unmarried couples to apply for joint loans, state media reported.
But for all the woes in China’s property sector, a low ownership rate is not one of them. China’s home ownership rate is 85%, compared with 66% in the US. For years the property sector has been used as a means of boosting growth through construction and as a way for local governments to raise money through land sales to developers. That means the supply of housing units often outstrips demand. “One wishes the Chinese government would just give up and go on to something else,” says Yang.
Local officials are not giving up. Janz Chiang, an analyst at Trivium China, a research institute, noted that some local governments have also removed restrictions on purchasing multiple properties as investments. “The move does help revive housing demand, but causes other political complications, creating a tension with Xi Jinping’s mantra that ‘houses are for living in’,” he said.