The Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration issued a notice on September 29, deciding to implement a nationwide mortgage interest subsidy policy for residents purchasing homes, aimed at supporting the rigid housing demand of urban and rural residents and easing the interest burden of commercial individual housing loans for families newly purchasing their first homes.
The policy precisely targets small-to-medium-sized, low-total-price ordinary rigid demand homes, providing yet another important measure to stabilize the housing market. The policy takes effect from October 1, 2026, with an initial implementation period of one year. During this period, for qualifying first-home commercial individual housing loans newly issued by handling banks, the fiscal department will provide interest subsidies at an annualized rate of 1 percentage point on the loan principal for a period not exceeding 5 years, with a maximum loan amount eligible for subsidies of 1 million yuan per household.
Relevant officials stated that the central government's implementation of a mortgage interest subsidy policy for residents is an exploration of ways to safeguard and improve people's livelihoods in the housing sector, helping relatively lower-income families preparing to buy the most ordinary homes "reduce their monthly payments a bit." This initiative primarily focuses on first-home rigid demand, with key support for ordinary families newly purchasing small-to-medium-sized, lower-priced homes.
The conditions that must be met include: first, using newly issued commercial individual housing loans to purchase first homes, excluding replacement of existing loans. The determination of "first home" follows current policies and includes both new and second-hand homes. Second, the purchased home must have a floor area not exceeding 120 square meters. Third, the purchased home price must not exceed 1.5 million yuan.
According to a report by the China Index Academy, since 2026, the national real estate market has remained in a phase of continuous adjustment, with first-tier cities leveraging strong urban competitiveness and sustained policy efforts to lead the way out of the adjustment period. In February, Shanghai took the lead with the "Shanghai Seven Measures," followed by Shenzhen optimizing purchase restrictions at the end of April, and Guangzhou introducing the "Guangzhou Eight Measures." In August, Beijing further optimized purchase restrictions, housing gift policies, and housing provident fund policies, lowering entry barriers and financial pressure for certain homebuying groups. Shanghai subsequently introduced the "Shanghai Eight Measures," further optimizing provident fund withdrawals, down payment requirements for second homes outside the outer ring, and "trade-in" subsidies.
The China Index Academy stated that due to continued supply contraction, overall inventory levels in first-tier cities have continued to decline, and the destocking cycle for new residential housing has maintained a trend of continuous improvement, with both month-on-month and year-on-year declines in destocking cycles across cities.
Before the long holiday, the real estate market had already seen a dense rollout of a series of combined policy measures. On September 20, the newly revised Regulations on the Management of Housing Provident Funds officially took effect. Additionally, on September 28, the State Council executive meeting explicitly proposed increasing the intensity of counter-cyclical macro policy adjustments, introducing a batch of pragmatic and effective incremental policies, and studying the introduction of measures to stabilize the real estate market and promote employment and income growth.
Compared with previous macro-level regulatory policies, the biggest difference of this interest subsidy is that it adopts a coordinated policy of "precise fiscal support + targeted monetary easing." From the overall situation of the real estate market, this policy may have a more direct impact on rigid demand transactions in second- and third-tier cities where total housing prices fall within the policy range. Ordinary second- and third-tier cities benefit more broadly, as mainstream rigid demand projects in central and western regions and northeastern provincial capitals are concentrated in the 1 million to 2 million yuan range, with a large number of rigid demand housing sources falling within the policy coverage, effectively supporting first-time buyers to enter the market and consolidating the market's bottoming-out rhythm.
Liu Yunlong, investment advisor at Guorong Securities, stated that the combination of fiscal and monetary policies provides clear and precise targeted support for rigid demand, with a more direct effect than previous broader policies. While activating rigid demand, promoting the market to stabilize and rebound, and improving expectations, the policy does not support high-end improvement or speculative demand, making its efforts more precise. Liu Yunlong suggested that investors prioritize real estate companies with state-owned backgrounds, stable cash flows, and project positioning focused on rigid demand. Such companies can more directly benefit from the policy, achieve faster inventory destocking, and are expected to realize valuation repair and stock price rebounds earlier. The richer their cash and rigid demand project reserves, the greater their elasticity. He also cautioned that the effects of this round of policy stimulus are inherently differentiated and structural, with some regional real estate companies facing longer recovery cycles.
Wu Wei, chief investment advisor at Datong Securities, believes that future improvements in housing market fundamentals will show a K-shaped divergence: high-quality leading real estate companies in core cities will stabilize first and gain market share, while companies with layouts in third- and fourth-tier cities and tight capital chains will continue to face liquidation. He recommends focusing on two directions: first, top-tier high-quality real estate companies with sound finances, low debt, and abundant land reserves in core cities; second, the post-cycle direction of real estate, where as second-hand home transactions and improvement demand recover, intermediary businesses are asset-light and can quickly benefit from transaction volume growth, while the property management sector has strong counter-cyclical capabilities and can serve as a defensive allocation.
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