The six major banks' outstanding personal mortgage balances decreased by over 700 billion yuan last year! With interest rates at a low point, is it worthwhile to pay off your mortgage early?

Has the headwind against paying off your mortgage early ended?

Since the second half of 2022, individual housing loan borrowers in China have accelerated their early repayment, gradually forming a “wave of early repayment” over a period of time.

But now, scenes such as snatching appointment slots at dawn and lining up for months are no longer common. Is the “headwind” of early mortgage repayment still continuing? The reporter from the Economic Daily News compiled data and found that the outstanding balance of personal mortgages at China’s six state-owned banks is about RMB 24.48 trillion, a decrease of about RMB 0.71 trillion compared with the previous year.

“Early repayment of mortgages definitely still exists now, but compared with the past few years, it definitely can’t be called a ‘wave’ anymore.” Wang Pengbo, chief analyst at Bonton Consulting, said that the decline in mortgage balances is jointly caused by residents’ early repayment of mortgages plus the relatively low willingness to buy a home last year.

It is worth noting that this year’s first quarter saw a “brief spring” in the real estate market. In response, Zhou Yiqin, a senior expert in financial policy, believes that this is not a short-term oversold rebound. Instead, as market interest rates continue to be lowered and housing purchase policies continue to be loosened, market confidence is being restored steadily, and this trend has the hope of continuing into the second quarter.

2025: Personal mortgage balances decline

The reporter compiled data and found that banks’ outstanding personal housing loan balances are still falling.

In 2024, as the main force in issuing mortgages, China’s six state-owned banks reduced their personal housing loans by RMB 0.62 trillion; for all of 2025, net reduction was RMB 0.71 trillion, expanding the decline compared with 2024.

It is worth noting that in the first half of 2025, China’s six state-owned banks saw a combined reduction of RMB 107.8 billion, clearly lower than the RMB 325.5 billion reduction in the first half of 2024. But in the second half of 2025, the reduction dropped sharply by about RMB 602.2 billion, further expanding the overall shrinkage of personal mortgages compared with 2024.

As outstanding personal mortgage balances continue to be reduced, the personal housing loan balances of China’s six state-owned banks have all moved on from the “RMB 6 trillion era.”

From the national market as a whole, personal housing loan balances are also moving downward. Data from the People’s Bank of China shows that at the end of 2025, the national outstanding balance of personal housing loans was RMB 37.01 trillion, down 1.8% year over year. This indicates that in some banks, outstanding personal housing loan balances even increased to some extent, and that personal housing loans have entered a stage of more refined competition among banks.

In the industry’s view, the decline in the outstanding balance of stock mortgages is essentially the result of two forces competing: first, how much is being “pulled out” through early repayment; second, how much new mortgage lending is “put in” through fresh issuance.

“Early repayment of mortgages definitely still exists now, but compared with the past few years, it definitely can’t be called a ‘wave’ anymore.” Wang Pengbo said that early repayment of mortgages combined with residents’ low willingness to buy homes last year, with these two factors working together, leads to a decline in banks’ outstanding personal mortgage balances.

Yang Haiping, a special research fellow at the Beijing Wealth Management Association, said that the real estate sector is still in an adjustment period. There are many customers with genuine demand, but there are also many customers who are waiting and watching; overall, the growth of mortgage lending is weak.

   **The real estate market sees a “brief spring” in Q1**               

In the first quarter of this year, second-hand home transactions in mainland China saw a brief spring. According to a report by Centaline, in March, the transaction area for second-hand homes in the 20 key cities was about 17.97 million square meters, up 117% month over month and also up 6% year over year. Total transaction area in the first quarter was about 41.08 million square meters, up 4% year over year.

And in this “brief spring” rally, first-tier cities such as Beijing and Shanghai have played the role of “forerunners.”

“The ‘brief spring’ in the real estate market in Q1 2026 is mainly driven by the second-hand home market in first-tier cities recovering. It is currently in a mild restoration stage, and the warm-up trend may have some continuity.” Zhou Yiqin told reporters that with the arrival of the “brief spring” rally, the positive impact on banks’ outstanding balances of personal housing loans will also gradually become apparent.

“Although it has not achieved a full reversal, I believe this is not a short-term oversold rebound. Rather, as market interest rates are gradually lowered and housing purchase policies are gradually relaxed, market confidence is being restored steadily. I think there is hope it will continue into Q2.” Zhou Yiqin pointed out that active second-hand home transactions will directly increase the number of mortgage applications, gradually slowing the decline in balances. Looking ahead, it is expected to provide positive support to mortgage balances. Overall, the real estate market is moving toward a direction of “higher volume, stable prices.”

Yan Yuejin, vice president of the Shanghai E-House Research Institute, told reporters that the “brief spring” focuses more on second-hand home transactions in key cities. It is still in the initial stage of national real estate recovery. With the market in Q2 continuing to improve, it also provides positive support for the loan market. “But some customers use provident fund loans, which will not be counted in commercial bank loan data, and it will also affect the balance of commercial loans.”

Some banks say that it has already appeared a clear rise in mortgage loan application inflow

Regarding this year’s personal mortgage situation, the reporter noticed that the management teams of multiple banks also made statements at their earnings briefings. Among them, Bank of Communications is relatively optimistic in its assessment of personal mortgage business.

At the bank’s 2025 annual results briefing, Zhou Wanfu, deputy governor of Bank of Communications, introduced that since March 2026, the inflow volume of mortgage loan applications at the bank has risen noticeably. “This should be a signal that the real estate market is stabilizing,” Zhou Wanfu said. If this trend continues, Bank of Communications’ mortgage business in 2026 will gradually achieve positive growth and help the bank’s entire retail loan business meet its expected growth targets.

Wang Jingwu, deputy governor of Industrial and Commercial Bank of China, responded to consumer loan non-performing rates. Wang Jingwu said that the asset quality of personal loan portfolios has long remained excellent. Over the past two years, affected by factors such as economic transformation, real estate market adjustment, and temporary mismatches between supply and demand, the non-performing rate has risen slightly in the short term, consistent with the overall industry trend.

“Our economy has a solid foundation, strong resilience, and ample potential. The supportive conditions for a positive long-term outlook and the basic trends have not changed. In the future, personal loan risk is controllable.” Wang Jingwu judged that as a package of policies speeds up implementation and policy dividends continue to be released, the foundation of the personal credit market will gradually improve, and the asset quality of personal loans will return to a reasonable level.

Although the state continues to introduce policies for real estate and the market also shows signs of warming up, Yang Haiping told reporters that the share of mortgage loans in banks’ asset allocation may be a declining trend.

Based on current data, the reporter noticed that large banks’ personal consumer loans and personal business loans both achieved significant growth. Specifically, Industrial and Commercial Bank of China’s personal consumer loans increased by RMB 244.8k, up 18.5%; personal business loans increased by RMB 7.1k, up 15.0%; and the growth rate of personal consumer loans within China’s Bank of China reached 28%.

Is it worth paying off your mortgage early?

The main driver behind the earlier “wave of early mortgage repayment” was borrowers. On the one hand, due to economic fluctuations; on the other hand, due to heightened volatility in China’s financial markets, with large declines in stock and fund prices, resulting in a clearly reduced return on investment for ordinary residents and a shift toward more conservative risk preference. In addition, some existing housing loans have relatively high interest rates, and for some borrowers, their existing mortgage rates exceed 5%. With these factors pushing together, borrowers diverted some of the funds originally used for investment toward early repayment.

However, as the interest rates on stock mortgages are lowered, the cost of personal housing loan interest is gradually decreasing too. According to PBOC data, in February this year, the weighted average interest rate on newly issued personal housing loans was about 3.1%, roughly 10 basis points lower than the same period last year, with loan interest rates remaining at a low level.

With interest rates at a low level, is early repayment still worthwhile?

“Whether it’s worthwhile depends on consumers’ current investment or savings return level, and how large the gap is between the loan interest rate after the cut and their returns.” Wang Pengbo said. If the investment return rate is higher than the loan interest rate, funds could be considered to allocate more toward investment; otherwise, borrowers may consider repaying part or all of the loan early. In addition, it’s also necessary to keep enough money for day-to-day living expenses and for future retirement and medical needs.

Also, regarding repayment methods, generally speaking, with the equal principal-and-interest repayment structure (equal principal), borrowers repay more principal and pay less interest in the early period, so early repayment is comparatively more worthwhile. With the equal principal-and-interest (equal payment) method, borrowers pay more interest and less principal in the early period; if repayment has already passed halfway, early repayment also may not be considered.

(Disclaimer: The contents and data in this article are for reference only and do not constitute investment advice. Please verify before using. Any actions taken are at your own risk.)

**** Reporter | Zhao Jingzhi****

Editor**** | ******** Duan Lian Wei Guan Hong Du Hengfeng****

Proofread by | Wei Guan Hong****

Cover image: Visual China (not related to the text/graphics)

****** | Economic Daily News nbdnews Original article | ** ****

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Economic Daily News

(Editor: Dong Pingping )

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