Has the trend of early mortgage repayment come to an end? Since the second half of 2022, borrowers in China have accelerated the pace of repaying their home loans ahead of schedule, leading to a wave of early repayments over a period of time. However, scenes of queuing for months or booking slots in the early morning are no longer common. Is the trend of early repayment still continuing?
Data compiled by reporters shows that the total outstanding personal housing loans at the six major state-owned banks amount to approximately 24.48 trillion yuan, a decrease of about 0.71 trillion yuan compared to the previous year. "Early repayments are still happening, but compared to previous years, it can no longer be called a 'wave'," said Wang Pengbo, Chief Analyst at Bo Tong Consultancy. He noted that the decline in mortgage balances is due to a combination of early repayments and subdued homebuying sentiment last year.
Notably, the property market experienced a "small spring" in the first quarter of this year. According to Zhou Yiqin, a senior financial policy expert, this is not a short-term rebound from oversold conditions but rather a steady recovery in market confidence as interest rates gradually decline and housing policies ease. He believes this trend is likely to continue into the second quarter.
Data shows that banks' outstanding personal housing loans continue to decline. In 2024, the six major state-owned banks, as the primary lenders of mortgages, saw a reduction of 0.62 trillion yuan in personal housing loans. By 2025, the net decrease expanded to 0.71 trillion yuan. Although the decline in the first half of 2025 was significantly smaller than in the same period of 2024, a sharp drop in the second half of 2025 led to a further contraction in the mortgage balance for the year.
As a result, the outstanding personal housing loans at the six major banks have now fallen below the 6 trillion yuan mark. Nationwide, the outstanding balance of personal housing loans also declined. Central bank data shows that by the end of 2025, the national outstanding balance stood at 37.01 trillion yuan, down 1.8% year-on-year. This indicates that some banks have seen an increase in their mortgage balances, signaling intensified competition in the sector.
Industry experts suggest that the decline in outstanding mortgage balances reflects a tug-of-war between two forces: the amount withdrawn through early repayments and the amount replenished by newly issued loans. "Early repayments are still occurring, but they are no longer at the scale seen in previous years," Wang Pengbo reiterated. He attributed the reduction in bank mortgage balances to the combined effect of early repayments and weak homebuying demand last year.
Yang Haiping, a special researcher at the Beijing Wealth Management Industry Association, noted that the real estate market remains in an adjustment phase. While there is demand from first-time homebuyers, many potential buyers are adopting a wait-and-see attitude, leading to sluggish growth in mortgage lending.
In the first quarter of this year, the secondary housing market in mainland China experienced a "small spring." A report by CRIC showed that in March, the transaction area of pre-owned homes in 20 key cities reached approximately 179.7 million square meters, up 117% month-on-month and 6% year-on-year. For the first quarter, the cumulative transaction area was about 41.08 million square meters, representing a 4% increase compared to the same period last year.
During this "small spring," cities like Beijing and Shanghai played a leading role. Zhou Yiqin commented, "The recovery in the first-quarter housing market was primarily driven by the secondary market in first-tier cities. We are currently in a phase of moderate recovery, and this warming trend may have some sustainability." He added that as the "small spring" unfolds, its positive impact on banks' mortgage balances will gradually become apparent.
"Although a full reversal has not yet been achieved, I believe this is not a short-term rebound but a steady restoration of market confidence as interest rates decline and policies ease. I am optimistic that this will continue into the second quarter," Zhou stated. He pointed out that active transactions in the secondary market will directly boost mortgage applications, gradually slowing the decline in outstanding balances and potentially providing positive support in the future. The overall property market is moving toward a trend of rising volume and stable prices.
Yan Yuejin, Vice President of the Shanghai E-House Real Estate Research Institute, noted that the "small spring" is more evident in the secondary markets of key cities. He described the current phase as an early stage of nationwide market recovery, with further improvements expected in the second quarter, which will also support the loan market. "However, some customers use provident fund loans, which are not included in commercial bank data, and this also affects commercial loan balances," he added.
Regarding the outlook for personal housing loans this year, several bank executives shared their views during earnings releases. Among them, Bank of Communications expressed relative optimism about its mortgage business. At the 2025 results conference, Zhou Wanfu, Vice President of Bank of Communications, reported a noticeable increase in mortgage applications since March 2026. "This could be a signal of stabilization in the property market," he said. If this trend continues, mortgage business is expected to achieve positive growth in 2026, helping the bank meet its retail loan targets.
Wang Jingwu, Vice President of Industrial and Commercial Bank of China, addressed the non-performing loan ratio for personal loans. He stated that the bank's personal loan asset quality has long remained strong, though the non-performing ratio has seen a short-term increase in recent years due to economic restructuring, adjustments in the property market, and temporary supply-demand imbalances. This trend is consistent with the industry as a whole. "China's economy has a solid foundation, strong resilience, and significant potential. The conditions supporting long-term growth remain unchanged, and personal loan risks are controllable," Wang asserted. He expects the personal credit market to gradually improve as policies are implemented and their benefits are realized, with asset quality returning to reasonable levels.
Despite ongoing policy support and signs of recovery in the property market, Yang Haiping suggested that the proportion of mortgages in banks' asset allocations may continue to decline. Current data shows significant growth in personal consumption loans and business loans at major banks. For instance, Industrial and Commercial Bank of China reported a 778.19 billion yuan increase in personal consumption loans, up 18.5%, and a 2.52 trillion yuan rise in personal business loans, up 15.0%. Bank of China saw a 28% growth in domestic personal consumption loans.
The earlier "wave" of early mortgage repayments was driven by several factors, including economic volatility, heightened fluctuations in financial markets, and declines in stock and fund prices, which reduced investment returns for ordinary households and increased risk aversion. Additionally, some borrowers faced high mortgage rates, exceeding 5%, prompting them to use funds originally earmarked for investments to repay loans early.
However, as mortgage rates have been adjusted downward, the cost of housing loans has gradually decreased. According to central bank data, the weighted average interest rate for new personal housing loans in February this year was approximately 3.1%, about 10 basis points lower than the same period last year, keeping loan rates at low levels.
With interest rates at low levels, is early repayment still worthwhile? "Whether it is cost-effective depends on the gap between the consumer's current investment or savings returns and the adjusted mortgage rate," Wang Pengbo explained. If investment returns exceed the loan interest rate, it may be better to allocate more funds to investments. Otherwise, partial or full early repayment could be considered. He also emphasized the importance of retaining sufficient funds for daily expenses and future needs such as retirement and healthcare.
From a repayment method perspective, equal principal repayment, which involves higher principal and lower interest payments in the early stages, generally makes early repayment more advantageous. For equal installment repayment, where interest payments are higher initially, early repayment may be less beneficial if more than half of the loan term has already passed.
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