According to a report by the South China Morning Post (SCMP) on the 19th, due to the continued stagnation in the Chinese real estate market, the early repayment rate of homeowners’ mortgage loans hit a record high, the highest ever. Guotai Junan Securities stated in a report on the 6th that in April, China’s early repayment rate for homeowner mortgages reached a record high of 37%, indicating that homeowners are trying to alleviate financial burdens sooner than planned.
The SCMP reported, “Over the past two years, investment expectations and risk assessments for many Chinese households have dramatically changed,” and explained, “As returns on various investments continue to diminish, many Chinese households want to repay loans early.” Guotai Junan Securities also stated in another report released the previous day that new medium and long-term yuan-denominated loans for Chinese households in May recorded a total of ¥514 billion (approximately $98.2 billion), a decrease of ¥117 billion (approximately $22.2 billion) compared to the same period last year.
The high rate of early mortgage repayments and the decrease in new mortgage loans are seen as reflecting a trend among households in China to reduce their borrowing, despite government efforts to support the housing market, as noted by SCMP. Analyst Gary Ng of investment bank Natixis warned that Chinese homeowners are turning to safer investments like deposits or bonds, and cautioned that the effects of recent government policies in China need to be monitored. Michelle Lam, an analyst in Greater China at Societe Generale, predicted that the trend of households reducing their loans will continue as the Chinese real estate market has not yet hit bottom.
A customer manager at the Guangzhou branch of the Agricultural Bank of China told SCMP, “Since it is highly unlikely that existing mortgage rates will decrease, customers have been applying for early repayments recently.” According to data from Chinese authorities on the 17th, new housing prices in May dropped the most in nearly 10 years.
[Photo Source: Reuters = Yonhap News]