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

Ask AI · Why has the prepayment-for-mortgages wave gradually fizzled out?

China Business Daily reporter: Zhao Jingzhi    China Business Daily editor: Wei Guanhong

Has the wind of prepaying mortgages finally blown itself out? Starting in the second half of 2022, individual housing-loan borrowers in China accelerated repayment of their loans ahead of schedule, and over a period of time, this gradually formed a “mortgage prepayment wave.”

But now, scenes like dawn ticket-snarling and lining up for months are no longer common. Is that “wind” of prepaying mortgages still continuing? A China Business Daily reporter compiled data and found that the outstanding balance of personal mortgages at China’s six major state-owned banks is about 24.48 trillion yuan, down by about 0.71 trillion yuan from the previous year.

“Prepaying a mortgage still certainly exists now, but compared with the past few years, it can no longer be called a ‘wave.’” Wang Pengbo, a senior analyst in the financial industry at Bontton Consulting, said that the decline in outstanding mortgage balances is the result of both residents’ prepayment of mortgages and last year’s relatively low willingness to buy homes occurring together.

It is worth noting that this year’s first quarter saw a “little spring” in the real-estate market. In this case, Zhou Yiqin, a senior expert on financial policies, believes this is not a short-term oversold rebound, but rather that as market interest rates are gradually lowered and home-buying policies are gradually loosened, market confidence is being steadily restored—and there is hope that this trend can continue into the second quarter.

Last year’s outstanding balance of personal mortgages fell

A reporter’s data compilation shows that banks’ outstanding balance of personal housing loans is still declining.

In 2024, as the main force in issuing mortgages, the personal housing loans at China’s six major state-owned banks decreased by 0.62 trillion yuan; in 2025 for the full year, the net decrease was about 0.71 trillion yuan, which is a larger drop than in 2024.

It is worth noting that in the first half of 2025, the combined decrease at China’s six major state-owned banks totaled 107.8 billion yuan, down significantly from 325.5 billion yuan in the first half of 2024, but in the second half of 2025 it fell sharply by 602.2 billion yuan, which means the overall contraction in personal mortgages last year further expanded compared with 2024.

As the outstanding balance of personal mortgages continues to shrink, the personal housing-loan balances at China’s six major state-owned banks have all said goodbye to the “trillion-yuan era of 6.”

From the national level, the outstanding balance of personal housing loans is also moving downward. Data from the PBOC shows that at the end of 2025, the national outstanding balance of personal housing loans was 37.01 trillion yuan, down 1.8% year over year.

In the industry’s view, the decline in the balance of existing mortgages is essentially a “competition” between two forces: first, how much prepayment “pulls out” from the pool; second, how much newly issued mortgages “adds in.”

Yang Haiping, a research fellow and special correspondent with the Beijing Wealth Management Industry Association, said that real estate is still in an adjustment period. There are many customers with urgent demand, but there are also many customers holding back and observing. Overall, growth in mortgage lending is weak.

A “little spring” in the real-estate market in the first quarter

In this year’s first quarter, the secondary home market saw a “little spring” in transactions. A report from Centaline Quarry (CRIC) shows that in March, the transaction area for secondary homes in 20 key cities was about 17.97 million square meters, up 117% month over month and also up 6% year over year; in cumulative terms for the first quarter, the total transaction area was about 41.08 million square meters, up 4% year over year.

In this “little spring” upswing, first-tier cities such as Beijing and Shanghai played the role of “front-runners.”

“The ‘little spring’ in the real-estate market in the first quarter of 2026 is driven mainly by the secondary-home market in first-tier cities, which is currently in a stage of mild recovery and restoration. Its warming trend may have a certain degree of continuity.” Zhou Yiqin told reporters. “The arrival of the ‘little spring’ will also gradually show positive effects on the outstanding balance of personal housing loans at commercial banks.”

Zhou Yiqin said that active secondary-home transactions will directly increase the volume of mortgage applications, gradually slowing the rate of decline in outstanding balances. In the future, it may provide positive support for the mortgage loan balance; overall, the real-estate market is moving toward a direction of “rising volume while prices stay stable.”

Yan Yuejin, deputy director of the Shanghai E-House Real Estate Research Institute, told reporters that the “little spring” trend focuses more on secondary-home transactions in key cities. It is still in the initial stage of the national real-estate market recovering. In the second quarter, if market transactions further improve, it will also provide positive support to the loan market. “But some customers have provident fund loans, which won’t be counted in commercial bank loan data, and this will also affect commercial mortgage balance data.”

Increase in mortgage loan application intake at Bank of Communications

Regarding personal mortgage lending this year, the reporter noted that several banks’ management also made judgments at their earnings briefings. Among them, Bank of Communications’ outlook for its personal mortgage business is relatively optimistic.

At the 2025 annual results briefing, Zhou Wanfù, vice president of Bank of Communications, introduced that since March 2026, the bank’s mortgage loan application intake has increased markedly. “This should be a signal that the real-estate market has stabilized,” Zhou Wanfù said. If this trend continues, Bank of Communications’ mortgage business in 2026 will gradually achieve positive growth and also help the bank’s entire retail loan book meet its expected growth target.

Vice president Wang Jingwu of Industrial and Commercial Bank of China responded to delinquency rates on individual loans. Wang Jingwu said that the asset quality of individual loan portfolios has long remained excellent. In the past two years, due to factors such as economic restructuring, real-estate market adjustments, and temporary mismatches between supply and demand, delinquency rates have risen somewhat in the short term, consistent with the industry’s overall trend.

“China’s economic foundation is stable, it has strong resilience, and it has great potential. The supporting conditions and fundamental trend for long-term improvement have not changed, and in the future, the risk of individual loan lending is controllable.” Wang Jingwu judged that as a package of policies accelerates implementation and as policy dividends keep being released, the foundation of the personal credit market will improve step by step, and the asset quality of personal loan portfolios will return to a reasonable level.

Although the country has continued to introduce policies for real estate and the market also shows signs of warming, Yang Haiping told reporters that the proportion of mortgage loans in banks’ asset allocation may be a trend of decline.

Based on current data, the reporter noted that large banks’ personal consumer loans and personal business-operating loans have achieved major growth. Specifically, Industrial and Commercial Bank of China’s personal consumer loans increased by 77.819 billion yuan, up 18.5%; personal business-operating loans increased by 252.238 billion yuan, up 15.0%; and the year-over-year growth rate of personal consumer loans within China at Bank of China reached 28%.

Is prepaying a mortgage worth it?

Previously, the main drivers of the “mortgage prepayment wave” were the borrowers. On the one hand, the economy experienced fluctuations; on the other hand, financial markets in China also saw fluctuations. Ordinary residents’ investment returns declined, and risk appetite became more conservative. In addition, some existing housing-loan interest rates are relatively high; for some borrowers, their existing mortgage rates exceed 5%. Various factors pushed borrowers to use part of the funds they had originally planned for investment to prepay their mortgages.

However, as the interest rates on existing mortgages are lowered, the cost of personal housing loans is also 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 mortgage lending rates have remained at a low level.

With interest rates at a low level, is prepaying a personal mortgage still worth it?

“Whether it’s worth it depends on the current investment or savings return level for consumers, and how large the difference is versus the mortgage interest rate after the adjustment.” Wang Pengbo said. If the investment return rate is higher than the loan interest rate, then you may consider using more of the funds for investment; otherwise, you may consider repaying part or all of the loan in advance. In addition, you also need to keep enough funds for everyday living expenses and for future retirement and medical needs.

Also, from the perspective of repayment methods, generally speaking, for equal-principal repayment, the principal paid in the early period is more and the interest is less, so prepaying tends to be slightly more worthwhile; for equal-principal-and-interest repayment, the interest paid in the early period is more and the principal is less. If repayment has already passed half of the term, you may also choose not to consider prepaying in advance.

China Business Daily