China’s Property Crash is Leading to Unprecedented Lending Practices for Senior Citizens
Due to the depressed state of the property market in China, some banks have taken drastic measures to encourage borrowing, such as extending the upper age limit on mortgages to between 80 and 95, allowing people aged 70 to take out loans with maturities of up to 25 years.
While these new age limits are not yet official national policy, analysts believe they are an attempt to stimulate demand in the property market while considering the country’s rapidly aging population. The terms of the mortgages are designed to alleviate debt payment burdens and encourage home buying and act as a “relay loan” where the borrower’s children will take over repayments if they are unable to do so.
These new measures come as China experiences a historic downturn in its property market, with new home prices falling for 16 consecutive months and sales by the top 100 developers in 2021 only reaching 60% of their previous levels. With China’s population shrinking for the first time in over 60 years, these new mortgage terms aim to address the deepening demographic crisis and its implications for the slowing economy.
Chinese Banks Offer Multi-Generational Home Loans with Varied Terms to Attract Borrowers
Different bank branches in China have varying rules for multi-generational loans. One branch of Bank of Communications allows borrowers up to the age of 70 to take out home loans that last for 25 years, meaning that the upper age limit on its mortgages has increased to 95.
However, the mortgage must be guaranteed by the borrower’s children, and their combined monthly income must be at least double the monthly mortgage payment. Another branch of Citic Bank has extended its upper age limit on mortgages to 80. This move could benefit middle-aged borrowers between the ages of 40 and 59 the most, allowing them to take out a mortgage for 30 years and reducing their monthly payments.
The Chinese housing market has been affected by Covid restrictions, falling home prices, rising unemployment, and protests by people refusing to pay mortgages on unfinished homes. Authorities have implemented stimulus measures to try and revive the market, including lending rate cuts and measures to help developers resume stalled construction.
Source: CNN Business