Chinese homeowners in a rush to clear mortgages early as consumers turn pessimistic over economic outlook
- Chinese borrowers are in a hurry to clear their mortgages early in a bid to reduce leverage, and this comes against the backdrop of an economic slowdown and falling stock market investments
- Figures from the central bank show that growth in household debt has slowed by over 50 per cent from January to August compared with a year earlier
Aki Wang made a resolution on her 35th birthday in June. She vowed to pay off her 25-year mortgage before she turns 40, which will save her close to 1 million yuan (US$140,535) in interest payments.
“I pay 5.1 per cent interest on my mortgage,” said the ear, nose and throat (ENT) specialist, who bought a two-bedroom flat in Hangzhou, the capital of southeastern Zhejiang province, with a loan of 2 million yuan in 2018. “What kind of wealth management product or stock investment gives you such returns?” she asked rhetorically, referring to the slumping equity markets that has eroded investment returns.
The medical practitioner has already repaid 700,000 yuan since 2018, including 150,000 yuan in one go in March.
She is among thousands of Chinese borrowers who are in a hurry to clear their mortgages early amid waning consumer confidence over the country’s economy that has been buffeted by headwinds. It also comes as returns from stock market investments have taken a hit, with the benchmark CSI 300 index down more than 20 per cent this year.
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“Such a trend is a result of people lacking confidence in the macro economy who would rather cut debt when they have the ability,” said Harry Hu, a senior director at S&P Global Ratings.