The six major banks' outstanding personal mortgage balances have decreased by 0.7 trillion yuan. Is it still necessary to repay the loan early?

Every Daily News Reporter｜Zhao Jingzhi    Every Daily News Editor｜Wei Guanhong

Has the trend of paying off mortgages early ended?

Since the second half of 2022, borrowers of personal housing loans in China have accelerated their early repayment, gradually forming a “prepayment rush” over a period of time.

But now, scenes of snatching tickets at dawn and queueing for months are no longer common. Is this “prepayment fever” for early mortgage repayment still continuing? Data compiled by a reporter from The Daily Economic News shows that the total outstanding balance of personal mortgages at China’s six major state-owned banks is about RMB 24.48 trillion, down about RMB 0.71 trillion from the previous year.

“Of course, early repayment of mortgages still definitely exists now, but compared with the past few years, it definitely can’t be called a ‘rush’ anymore.” Wang Pengbo, chief analyst at B&T Consulting, said that the decline in outstanding balance on mortgage loans is jointly caused by residents’ early repayment of mortgages as well as last year’s relatively weak willingness to buy homes.

It is worth noting that this year’s first quarter saw a “spring-like upswing” in the real estate market. Senior financial policy expert Zhou Yiqin believes this time is not a short-term rebound from an oversold situation. Instead, as market interest rates are gradually lowered and housing purchase policies are gradually relaxed, market confidence is being steadily restored, and there is hope that this trend will continue into the second quarter.

2025: Personal mortgage balances continue to fall

Data compiled by the reporter shows that banks’ outstanding balances of personal housing loans are still declining.

In 2024, as the main force in issuing mortgages, the personal housing loans of China’s six major state-owned banks decreased by RMB 0.62 trillion; while in 2025, the net decrease for the full year was RMB 0.71 trillion, with the decline expanding compared with 2024.

It is worth noting that in the first half of 2025, China’s six major state-owned banks’ combined decrease amounted to RMB 107.8 billion, clearly lower than the RMB 325.5 billion decrease in the first half of 2024; but in the second half of 2025, the decrease fell sharply by about RMB 602.2 billion, causing the overall shrinkage in personal mortgage loans last year to expand further compared with 2024.

As personal mortgage balances keep getting smaller, the personal housing loan balances of China’s six major state-owned banks have all moved on from the “RMB 6 trillion era.”

From the national broad picture, personal housing loan balances are also moving downward. Data from the PBOC shows that at year-end 2025, the nationwide outstanding balance of personal housing loans was RMB 37.01 trillion, down 1.8% year over year. This indicates that the outstanding balances of personal housing loans at some banks have even risen, and personal housing loan business has entered a stage of refined competition.

In the industry’s view, the decline in outstanding balances of stock mortgages is essentially the result of a tug-of-war between two forces: one is how much money is “withdrawn” through early repayment of mortgages; the other is how much is “put in” through newly issued mortgages.

“Of course, early repayment of mortgages still definitely exists now, but compared with the past few years, it definitely can’t be called a ‘rush’ anymore.” Wang Pengbo said that early repayment of mortgages combined with last year’s residents’ weak willingness to buy homes means the two factors together lead to a decline in banks’ outstanding balances of personal mortgage loans.

Yang Haiping, a research associate specially invited by the Beijing Wealth Management Industry Association, said that the real estate market is still in an adjustment period. There are many households with urgent demand, but there are also many households that are waiting and watching. Overall, growth in mortgage loans is lackluster.

A “spring-like upswing” arrives for the real estate market in the first quarter

In the first quarter, second-hand residential property transactions in mainland China saw a spring-like upswing. According to a report by Centaline? [Note: source name likely intended as “CRIC” but preserved as translated line: “Centaline”]. Data shows that in March, the transaction area of second-hand homes in 20 key cities was about 17.97 million square meters, up 117% month over month, and also up 6% year over year. The cumulative transaction area for the first quarter was about 41.08 million square meters, up 4% year over year.

In this “spring-like upswing” cycle, first-tier cities such as Beijing and Shanghai played the role of “vanguard.”

“The ‘spring-like upswing’ in the real estate market in the first quarter of 2026 is mainly driven by the second-hand housing market in first-tier cities. It is currently in a phase of mild repair, and its warming-up trend may have some continuity.” Zhou Yiqin told reporters. As the “spring-like upswing” comes, the positive impact on the outstanding balance of personal housing loans at commercial banks will gradually become visible.

“Although an overall reversal has not been achieved, I believe this is not a short-term rebound from an oversold condition. Rather, as market interest rates are gradually lowered and housing purchase policies are gradually relaxed, market confidence is being steadily restored. I believe there is hope that it will continue into the second quarter.” Zhou Yiqin said. Active second-hand housing transactions will directly drive an increase in mortgage application volume, gradually slowing the rate of decline in the outstanding balance. In the future, it is expected to provide positive support to mortgage balances, and the overall real estate market is moving toward a direction of “higher volume and stable prices.”

Yan Yuejin, deputy director of the Shanghai E-house Real Estate Research Institute, told reporters that the “spring-like upswing” focuses more on second-hand housing transactions in key cities. It is still in the initial stage of national real estate market recovery. With the market transactions in the second quarter further improving, it will also provide positive support to the loan market. “But some customers use provident fund loans, which will not be reflected in commercial bank loan data, and it will also affect the outstanding balance of commercial loans.”

Some banks say mortgage loan applications have clearly increased

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

At the 2025 annual results press conference, Zhou Wanfu, vice president of the Bank of Communications, introduced that since March 2026, the bank’s mortgage loan application volume has clearly increased. “This should be a signal that the real estate market has stabilized.” Zhou Wanfu said that if this trend continues, the bank’s mortgage business in 2026 will gradually achieve positive growth, and it will also help drive the Bank of Communications’ entire retail loan portfolio to meet its expected growth target.

Wang Jingwu, vice president of the Industrial and Commercial Bank of China, responded to personal loan non-performing rates. Wang Jingwu said that the quality of assets for personal loan portfolios has long remained excellent. Over the past two years, due to factors such as economic transformation, real estate market adjustment, and temporary imbalances between supply and demand, the non-performing rate has moved slightly upward in the short term, consistent with the overall trend in the industry.

“Our country’s economic foundation is steady, our resilience is strong, and our potential is large. The supporting conditions and fundamental trends for a long-term positive outlook have not changed. In the future, the risk of personal loan operations 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 has also continued to introduce policies related to real estate, and the real estate market shows signs of recovery, Yang Haiping told reporters that the proportion of mortgage loans in banks’ asset allocation may be on a declining trend.

Based on current data, the reporter noticed that large banks’ personal consumer loans and personal operating loans have achieved substantial growth. Among them, the Industrial and Commercial Bank of China’s personal consumer loans increased by RMB 244.8k, up 18.5%; personal operating loans increased by RMB 7.1k, up 15.0%; and the growth rate of Bank of China’s personal consumer loans within the mainland market reached 28%.

Is early repayment of a mortgage worth it?

The main drivers behind the earlier “mortgage prepayment rush” for housing loans were borrowers. On the one hand, due to economic fluctuations; on the other hand, due to increased volatility in China’s financial markets, stock and fund prices fell sharply, and investment returns for ordinary residents declined significantly, causing risk appetite to become more conservative. In addition, some outstanding housing loan interest rates are relatively high. For some borrowers, their stock mortgage rates exceed 5%. Driven by these factors, borrowers used part of the funds that had originally been allocated for investment to make early repayments.

However, as the interest rates on stock mortgages are lowered, the cost of personal housing loan interest rates is gradually decreasing. 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, and loan interest rates have remained at a low level.

With interest rates at a low level, is it still worth making early repayments of a personal mortgage?

“Whether it’s worth it depends on the level of a consumer’s current investment or savings returns, and how big the spread is between that and the mortgage interest rate after the cut.” Wang Pengbo said. If the investment return rate is higher than the loan interest rate, then it may be worth using more of the funds for investment; otherwise, it may be appropriate to consider repaying part or all of the loan early. In addition, it is also necessary to leave sufficient funds for day-to-day living expenses as well as future retirement and medical expenses.

Also, regarding repayment methods, in general, the equal principal and interest? method? [Note: original is “等额本金” and “等额本息”; translated as “equal-principal repayments” and “equal principal-and-interest repayments” below.] With equal principal repayments, more principal is repaid in the early stage and less interest is paid, so early repayment is a bit more advantageous. With equal principal-and-interest repayments, more interest is repaid in the early stage and less principal is repaid. If repayment has already passed the halfway point, you may also not need to consider early repayment.

Cover image source: Every Daily Media Database