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China – real estate market. Banks offer loans to 70-year-olds

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China’s real estate market is in such a slump that some banks are resorting to drastic measures, including allowing customers to pay off mortgages up to the age of 95, CNN reports.

Several banks in the cities of Nanning, Hangzhou, Ningbo and Beijing have extended the upper age limit for mortgage loans to 80-95 years, according to multiple state media reports. This means that people in their 70s can now take out loans for 10 to 25 years.

The market in collapse

real estate market in China is experiencing a historical crisis. New home prices fell for 16 straight months through December. Sales of the top 100 developers in the country last year amounted to only 60 percent. 2021 level.

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“The new age limits, which are not yet an official national policy, aim to breathe life into the country’s moribund real estate market,” said Yan Yuejin, a real estate analyst at E-House China Holdings.

“Basically, it is a policy tool to stimulate housing demand as it can ease the burden of paying down debt and encourage home buying,” he added.

The new mortgage terms are referred to as a “relay loan”. This means that if the older borrower is unable to repay the loan, his children will have to do it.

Demographic crisis

Last month, China reported that its population would shrink in 2022 for the first time in more than 60 years, marking a new milestone in the country’s deepening demographic crisis. The number of people aged 60 and over rose to 280 million at the end of last year. That’s almost 20 percent. the entire population.

Under previous rules published by the banking regulator, the age of the mortgage borrower plus the length of the mortgage should not exceed 70 years. The average life expectancy in China is about 78 years.

China’s Banking and Insurance Regulatory Commission has not commented publicly on the new terms. But bank branches across the country set their own rules for these multi-generational loans.

According to the Beijing News newspaper, the Bank of Communications branch in the Chinese capital reported that borrowers aged 70 can take home loans for 25 years, which means that the upper age limit for mortgage loans has been raised to 95.

But there are also conditions: the mortgage payment must be guaranteed by the borrower’s children, and their combined monthly income must be at least twice the monthly mortgage payment.

Citic Bank’s Beijing branch has extended the age limit for its mortgages to 80.

Will the younger ones benefit?

Hong Hao, chief economist at Grow Investment Group, said it was a “drastic” measure and “could be a marketing ploy to encourage older people to pay mortgages to the younger generation.”

Yan Yuejin said that the main beneficiaries of this move may not be elderly people, but middle-aged borrowers, between 40 and 59 years old. Under the extended cut-off age, these people can get a mortgage for 30 years. This is the maximum length allowed in the Middle Kingdom.

According to E-House’s calculations, if the bank extends the upper age limit to 80, borrowers aged 40 to 59 may gain an additional 10 years to pay off the mortgage. Assuming their mortgage is 1 million yuan (about $145,000), then their monthly payment could be reduced by 1,281 yuan ($186), or 21 percent.

Main photo source: Shutterstock

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