Chinese Banks Try Stimulating Housing Market With Mortgages For 95-Year-Olds

‘Relay loans’ that can pass on to children follow other efforts to make borrowing more flexible

In an attempt to revive China’s languishing housing market, banks in some cities are increasing the upper age limit on mortgages to between 80 and 95.

Although not a national policy, banks in Hangzhou, Beijing, and other major cities have begun offering “relay loans” to elderly customers, which pass on to their children in case they cannot pay them off.

Regulators have previously endorsed or enforced lower age limits on borrowing, calculated by the formulation of age plus loan period, and normally capped at about 70 years.

But the new offerings, from banks and lenders across several Chinese provinces, comprise limits of up to 90 or even 100 years. They allow older people to take out mortgages of twenty or more years, and middle-aged people to take out mortgages with longer repayment periods.

The products are different in specifics, with some seeming to string along 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 apply for a 25-year mortgage, as long as it is guaranteed by their children and financed by an inflated minimum monthly income, Beijing News reported.

Netizens are doubtful.

“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 persuading pensioners to take out loans. The number of foreclosures on properties rose by more than one-third in 2022.

The moves seem to be aimed at stimulating China’s flagging housing market. House prices fell last year, and analysts are divided about how much the sector will recover this year.

Confidence in the market continues to falter. In recent years the government has suppressed speculation and “reckless” lending in the housing sector, as a part of President Xi Jinping’s “common prosperity” initiative to rein in extremely high incomes.

Government restrictions on borrowing triggered a cash flow crunch for property developers in 2022. Several firms stopped construction on new builds, leaving people without the homes they had applied mortgages for. Delayed housing projects caused at least 282 protests across China between May and December 2022, according to China Dissent Monitor, a project managed by Freedom House, an American research organization.

Overall the property sector contracted by 5% last year. “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 feel about the new offerings, and the skirting of previous age caps. But state financial authorities have been introducing new flexibilities for borrowers in recent months.

In January, the central bank said the floor on mortgage rates could be reduced or eliminated for first-time buyers in dozens of cities where new home prices were continuously slumping.

Last week several banks made public they would permit unmarried couples to apply for joint loans, state media reported.

But for all the problems in China’s property sector, a low ownership rate is not among them. China’s homeownership rate is 85%, in contrast to 66% in the US. For years the property sector has been used as a means of ramping up growth through construction and as a way for local governments to amass funds 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 abolished restrictions on buying 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.