(Yicai Global) Feb. 7 -- Banks in China are facing greater pressure since the end of last year as borrowers rush to repay mortgages ahead of schedule amid lower interest rates and returns from wealth management products.

“Early mortgage repayments have hit more than CNY100 million (USD14.7 million) in our bank since last month, with about a 50 percent increase in the number of people paying off mortgages ahead of schedule,” said a loan manager at a bank in Dongguan, Guangdong province.

Wu Xiao is one of those making early repayments. He paid off a CNY900,000 (USD132,665) mortgage for his first apartment early in four tranches, saving more than the same amount in interest. When Wu bought in 2021, the interest rate was 5.88 percent for 30 years, so he would have had to pay interest of over CNY1 million (USD147,405).

People like Wu are using social media to explain how to make early repayments and calculate interest. But many borrowers said they hit a snag when trying to do so. For instance, some said they could not use the early repayment schedule channel on China Construction Bank’s app and were told they need to wait two to three months after first making reservations at branches.

For early mortgage repayment, people need to make applications and verify their identities and loan situation in offline branches at least 30 days in advance, Agricultural Bank of China said, adding that repayment can only proceed after applications are approved.

Early mortgage repayment is essentially a defensive response by the public in the face of uncertainty, said Zhang Bo, head of 58 Anjuke Institute, adding that the banks’ practice of shutting down online application channels is not worth advocating.

Zhang said the economic recovery will enhance buyer confidence in housing market and increase the number of real estate sales, thereby increasing the scale of incremental housing loans and weakening the impact of early repayment.

Data from Beike Research Institute showed that as of Jan. 31, a number of Chinese cities had cut interest rates for first-time mortgages, with a minimum of only 3.7 percent. Many were above 5 percent previously.

Editor: Peter Thomas