(Yicai) Sept. 30 -- China has launched its first nationwide mortgage interest subsidy program for first-time homebuyers, reducing borrowing costs on qualifying home loans for up to five years as part of efforts to help ease the financial burden on buyers and support housing demand.

Under the new policy, eligible first-time homebuyers who take out a mortgage on or after Oct. 1 to purchase a home priced at no more than CNY1.5 million (USD224,000) and measuring no more than 120 square meters will receive a government-funded interest subsidy of 1 percentage point, according to a notice jointly issued yesterday by the Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration.

Borrowers can receive the subsidy on as much as CNY1 million of mortgage principal for a maximum of five years. They need only authorize their bank when signing the contract, after which their lender will automatically calculate and deduct the subsidy from monthly mortgage payments. Existing mortgages and refinancing transactions are excluded.

The policy is aimed at first-home purchases that satisfy genuine housing needs, a finance ministry official said, adding that it is intended to help ordinary families buy lower-priced small and mid-sized properties. By targeting this group, the government intends to ensure that limited fiscal resources benefit a larger number of households with real housing needs, the person said.

The mortgage subsidy was announced alongside a broader package of monetary and fiscal measures to support the world’s second-largest economy.

At current mortgage rates for first-home buyers, the subsidy is equivalent to reducing interest costs by roughly one-third, the official noted. Because the financial assistance can remain in effect for as long as five years, a household taking out a long-term loan of CNY1 million could save nearly CNY50,000 (USD7,460) in interest payments over the course of the subsidy period, they said.

Eligibility for first-home status will continue to be determined under existing regulations, and both newly built properties and pre-owned homes qualify under the policy, according to the authorities.

Editor: Tom Litting