China’s disgruntled homeowners drive ‘wave of early repayment’ on mortgages, threatening Beijing’s consumption drive
- Dismayed with being locked into higher-interest loans as rates fall, many Chinese homeowners are choosing to pay down their mortgages
- China should roll out measures to help direct the use of household war chests into investments and spending instead, analysts say
In January, Britney Sun, a 33-year-old clerk in China’s port city Tianjin, began to think for the first time about paying down her 2 million yuan (US$294,700) mortgage.
With some savings under her belt, she calculated that reducing her principal rather than spending that money on other things could save her nearly 100,000 yuan in interest over the life of the loan.
She thought she had snatched a good deal last October with a 4.2 per cent annual rate for her 80-square-metre home, after her friends got loans at 5 to 6 per cent some months earlier. But now that the mortgage rate in her city has dropped to a new low of 3.9 per cent, she feels otherwise.
“I am paying extra interest just because I bought my home a couple months early,” she said. “That is not fair. I need to do something to compensate for my loss.”
Sun’s discontent is shared by many homeowners in China, who were caught in the red-hot market when they bought a home a few years ago. Beijing had been keeping mortgage rates high to cool the market, but last year, it made a U-turn and lowered rates to spur sales, leaving many disgruntled and concerned about their future.
