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Analysis: China’s mortgage rate cuts spur prepayment rush, threaten bank earnings

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Analysis: China’s mortgage rate cuts spur prepayment rush, threaten bank earnings

BEIJING, Feb 17 (Reuters) – China has been slicing mortgage charges since final yr to spice up gross sales in its moribund property market, however the primary outcome up to now has merely been a rush by households to repay current mortgages early, doubtlessly squeezing banks’ income.

Analysts estimate that almost $700 billion of mortgages – near one-eighth China’s excellent whole – have been pay as you go since early final yr, when banks began to decrease borrowing charges.

Mortgage holders, feeling unduly burdened by the upper charges they took on in years previous, are tapping their private financial savings or taking out low cost loans beneath stimulus applications supposed for big-ticket shopper purchases or for beginning new companies.

This threatens banks’ income on mortgages, which accounted for about 30% of excellent loans at China’s 5 largest banks as of final June, in line with their newest monetary stories.

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It additionally highlights, nonetheless, how mortgage price cuts and different measures to help China’s faltering property sector, hit by a hunch in demand and a money crunch at main builders, have but to ship a significant restoration, whilst current information present the market is stabilising. Analysts count on a restoration will solely kick in in direction of the second half of this yr.

“From the banks’ standpoint, early mortgage reimbursement means funds are paid again to banks, and will assist fund new mortgage loans, however the subject is poor shopping for sentiment,” mentioned Yan Yuejin, an analyst at E-house China Analysis and Improvement Establishment, a Shanghai-based property providers firm.

The present disinterest in new dwelling purchases contrasts sharply with the overheated property market of prior years, when authorities saved mortgage charges excessive to chill hypothesis.

About 17.7 trillion yuan ($2.6 trillion) of mortgages, almost half the present excellent whole, had been granted between the fourth quarter of 2017 and the primary quarter in 2022 at comparatively excessive charges of 5.26% to five.72%, mentioned Judy Zhang, a banking analyst at Citigroup.

In direction of the center of final yr, nonetheless, regulators started decreasing benchmark mortgage charges to prop up property demand, after a liquidity disaster amongst builders despatched dwelling costs and gross sales right into a downward spiral.

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In accordance with a survey by Chinese language mortgage information supplier Rong360 in January, the typical mortgage price for first-time dwelling patrons in December was 4.16%, down 137 foundation factors from a yr earlier and the bottom because the survey started in 2015.

PROPERTY SLUMP

Disgruntled householders saddled with the older, greater charges responded by paying off their mortgages early: Citigroup’s Zhang estimates that pay as you go mortgages totalled 4.68 trillion yuan final yr, in contrast with China’s whole excellent mortgages of 38.8 trillion yuan at end-2022, in line with central financial institution information.

Zhang wrote in a current word that heavy prepayments may persist for higher-rate mortgages, knocking as much as 5% off Chinese language banks’ earnings this yr in a worst-case state of affairs.

A delivery worker in Shanghai who gave solely his surname Wang mentioned he saved not less than 200,000 yuan final month by taking out a lower-rate shopper items mortgage to pay down his authentic mortgage on an house within the close by metropolis of Suzhou.

“I made a decision to take action as a result of I am burdened with a mortgage price that is too excessive,” Wang mentioned. He declined to provide his full title because of the sensitivity of the matter.

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Some banks have tried to stem the tide of prepayments by including pink tape and slowing the processing of purposes, forcing some debtors to attend for months for approvals, native media have reported.

A banker on the Beijing department of a business financial institution mentioned about 20% of current shoppers had utilized to prepay mortgages and his financial institution had stretched the approval course of to about half a yr.

“Banks are attempting to stall for time,” the banker mentioned. He declined to be named as he was not authorised to talk to the media.

The push of prepayments has continued into this yr, with the boring outlook for returns on investments similar to shares and bonds additionally encouraging cash-rich debtors to repay money owed, mentioned Nicholas Zhu, a banking analyst at Moody’s.

He anticipated this deleveraging to undermine confidence within the property market, which has already been badly shaken by the liquidity disaster and slumping gross sales.

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The authorities have signalled concern over the rise of prepayments, and final week China’s central financial institution and prime banking regulator met with lenders to debate methods to deal with the difficulty, the state-backed China Banking and Insurance coverage Information reported.

The regulators mentioned they might step up investigations and penalties for the misuse of enterprise and shopper loans, in line with the report.

Nonetheless, the authorities are probably eager to keep away from additional angering homebuyers, who created a stir final yr with protests over closely indebted builders that failed to finish initiatives on time.

The regulators mentioned banks shouldn’t impose restrictions on certified householders seeking to prepay their dwelling loans and may defend the legit pursuits of financial institution prospects, the report mentioned.

($1 = 6.8545 Chinese language yuan renminbi)

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Reporting by Ziyi Tang, Liangping Gao and Ryan Woo; Further reporting by Kevin Huang and Jason Xue; Enhancing by Edmund Klamann

Our Requirements: The Thomson Reuters Belief Ideas.

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Video: Pope Calls for Humanitarian Aid and Peace in Gaza

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Video: Pope Calls for Humanitarian Aid and Peace in Gaza

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Pope Calls for Humanitarian Aid and Peace in Gaza

Pope Leo XIV made a renewed appeal to end the humanitarian crisis in Gaza during his first general audience at the Vatican.

Dear brothers and sisters, I am happy to be with you in this, the first general audience of my pontificate.

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International video coverage from The New York Times.

International video coverage from The New York Times.

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At least 82 killed in Israeli strikes on Gaza as critical aid fails to reach Palestinians

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At least 82 killed in Israeli strikes on Gaza as critical aid fails to reach Palestinians

Israeli strikes continued to pound the Gaza Strip Wednesday, despite a surge in international anger at Israel’s widening offensive. The attacks killed at least 82 people, including several women and a week-old infant, according to the Gaza Health Ministry and area hospitals.

Israel began allowing dozens of humanitarian trucks into Gaza on Tuesday, but the aid has not yet reached Palestinians in desperate need.

Jens Laerke, the spokesperson for the U.N.’s humanitarian agency, said no trucks were picked up from the Gaza side of Kerem Shalom, the Israeli border crossing with southern Gaza.

A truck loaded with humanitarian aid for the Gaza Strip makes its way to the Kerem Shalom crossing as border police officers prevent activists from blocking the road in southern Israel, Wednesday, May 21, 2025. (AP Photo/Ohad Zwigenberg) (AP Photo/Ohad Zwigenberg)

U.N. spokesperson Stéphane Dujarric said Tuesday that although the aid had entered Gaza, workers were not able to bring it to distribution points after the Israeli military forced them to reload the supplies onto separate trucks and workers ran out of time.

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The Israeli defense body that oversees humanitarian aid to Gaza said trucks entered Wednesday morning, but it was unclear if that aid would move deeper into Gaza for distribution. The U.N. agency for Palestinian refugees, UNRWA, said its staff had waited several hours to collect aid from the border crossing but were unable to do so on Tuesday.

ISRAEL BLOCKS HUMANITARIAN AID INTO GAZA AFTER HAMAS REJECTS CEASEFIRE EXTENSION PROPOSAL

A few dozen Israeli activists opposed to Israel’s decision to allow aid into Gaza while Hamas still holds Israeli hostages attempted to block trucks carrying supplies Wednesday morning, but were kept back by Israeli police.

Diplomats come under fire in Jenin

A group of diplomats came under fire while visiting Jenin, a city in the Israeli-occupied West Bank, according to the Palestinian Authority. The diplomats were on an official mission to observe the humanitarian situation in Jenin when shots rang out.

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An aid worker, who did not want to be named for fear of reprisal, said a delegation of about 20 regional, European and Western diplomats were standing near the entrance of the Jenin refugee camp when they heard gunshots Wednesday, she said. No one was injured, she added.

The Israeli military said the delegation “deviated from the approved route” and Israeli soldiers fired warning shots to distance them from the area. The military apologized and said they will contact all countries involved in the visit.

Palestinian man carries a wrapped body

Palestinians carry the bodies of their relatives including children who were killed in an Israeli army airstrike in Deir al-Balah, Gaza, Wednesday, May 21, 2025. (AP Photo/Abdel Kareem Hana) (AP Photo/Abdel Kareem Hana)

Footage shows a number of diplomats running for cover as rapid shots rung out. European Union foreign policy chief Kaja Kallas said firing even warning shots was unacceptable and called on Israel to investigate.

The Italian government of Premier Giorgia Meloni also demanded an explanation, saying that its vice consul was among those who came under fire.

Jenin has been the site of Israel’s widespread crackdown against West Bank militants since earlier this year.

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On Jan. 21 — just two days after its ceasefire deal with Hamas in Gaza — Israeli forces descended on Jenin as they have dozens of times since Hamas’ Oct. 7, 2023, attack on Israel. The fighting displaced tens of thousands of Palestinians, one of the largest West Bank displacements in years.

International pressure on Israel

On Tuesday, the United Kingdom suspended free trade talks with Israel over its intensifying assault, a step that came a day after the U.K., Canada and France promised concrete steps to prompt Israel to halt the war. Separately, the European Union was reviewing an EU pact governing trade ties with Israel over its conduct of the war in Gaza, according to its foreign policy chief.

Israel says it is prepared to stop the war once all the hostages taken by Hamas return home and Hamas is defeated, or is exiled and disarmed. Hamas says it is prepared to release the hostages in exchange for a full Israeli withdrawal from the territory and an end to the war. It rejects demands for exile and disarmament.

ISRAEL FIRES BACK AT UK OVER SUSPENDED TRADE TALKS, REJECTS ‘EXTERNAL PRESSURE’

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Israel called back its senior negotiating team from ceasefire talks in the Qatari capital of Doha on Tuesday, saying it would leave lower-level officials in place instead. Qatari leaders, who are mediating negotiations, said there was a large gap between the two sides.

Meanwhile, Israeli strikes continued across Gaza. In the southern city of Khan Younis, where Israel recently ordered new evacuations pending an expected expanded offensive, 24 people were killed, 14 from the same family. A week-old infant was killed in central Gaza.

The Israeli military did not immediately comment on the strikes, but has said it is targeting Hamas infrastructure and accused Hamas militants of operating from civilian areas.

Desperate need for food

Experts have warned that many of Gaza’s 2 million residents face a high risk of famine. At one displacement camp in Gaza City, a charity group distributed thin and watery lentil soup.

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Somaia Abu Amsha scooped small portions into bowls for her family, saying they have not have had bread for over 10 days and she can’t afford rice or pasta.

Children look at a destroyed building

Palestinians inspect a house destroyed by an Israeli airstrikes in Deir al-Balah, Gaza, Wednesday, May 21, 2025. (AP Photo/Abdel Kareem Hana) (AP Photo/Abdel Kareem Hana)

“We don’t want anything other than that they end the war. We don’t want charity kitchens. Even dogs wouldn’t eat this, let alone children,” she said, pointing at the soup.

Pope Leo XIV on Wednesday called for aid to reach the Gaza Strip and for an end to the “heartbreaking” toll on its people during his first general audience in St. Peter’s Square.

Hospitals surrounded

Israeli troops also have surrounded two of northern Gaza’s last functioning hospitals, preventing anyone from leaving or entering the facilities, hospital staff and aid groups said this week.

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Palestinian President Mahmoud Abbas on Wednesday urged world leaders to take immediate action to end Israel’s siege on Gaza, issuing the appeal during a visit to Beirut, where he was expected to discuss the disarmament of Palestinian factions in Lebanon’s refugee camps.

ISRAEL ENCIRCLES 2 OF NORTHERN GAZA’S LAST FUNCTIONING HOSPITALS, GROUPS SAY

“It is time to end the war of extermination against the Palestinian people. I reiterate that we will not leave, and we will remain here on the land of our homeland, Palestine,” Abbas said, demanding the immediate entry of aid, the release of detainees, and a full withdrawal from Gaza.

The war in Gaza began when Hamas-led militants attacked southern Israel, killing some 1,200 people, mostly civilians, and abducting 251 others. The militants are still holding 58 captives, around a third of whom are believed to be alive, after most were returned in ceasefire agreements or other deals.

 

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Israel’s retaliatory offensive has destroyed large swaths of Gaza and killed more than 53,000 Palestinians, mostly women and children, according to Gaza’s Health Ministry, which doesn’t differentiate between civilians and combatants in its count.

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Member of Irish rap band Kneecap charged with ‘terrorism’ offence

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Member of Irish rap band Kneecap charged with ‘terrorism’ offence

British police say Mo Chara displayed a flag of Lebanon’s Hezbollah at a concert.

A member of the Irish rap band Kneecap has been charged with a “terrorism” offence in the United Kingdom for waving a flag of the armed Lebanese group Hezbollah at a concert in November 2024 in London.

Liam O’Hanna, whose stage name is Mo Chara, is due to appear at Westminster Magistrates’ Court in London on June 18, charged under the Terrorism Act, British police said on Wednesday.

Kneecap has been vocal in its support for the Palestinian cause since the October 7, 2023-led Hamas attacks and Israel’s devastating war on Gaza, equating the struggles of the Irish under British colonial rule to that of Palestinians under that of Israel.

Pro-Palestinian chants are a regular fixture in their gigs. The band says they have been targets of a smear campaign for calling out Israel’s genocidal war.

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The Belfast trio is also well known for its political and satirical lyrics and use of symbolism associated with the Irish Republican movement, which seeks to unite Northern Ireland, currently part of the UK, with the Republic of Ireland.

More than 3,600 people were killed during three decades of violence in Northern Ireland during “The Troubles” involving the Irish Republican Army (IRA), pro-British Loyalist militias and the UK security forces.

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Kneecap takes its name from a brutal punishment, which involved being shot in the kneecaps, that was meted out by paramilitary groups to informers and drug dealers.

The band has been praised for invigorating the Irish-language cultural scene in Northern Ireland, where the status of the language remains a contested political issue in a society still split between Protestant British Unionists and Catholic Irish Nationalist communities.

It has also been criticised for lyrics laden with expletives and drug references.

Kneecap came under intense scrutiny and criticism last month during their performance at the music festival Coachella in California when they projected the words “F*** Israel. Free Palestine.” on stage.

“The Irish not so long ago were persecuted by the Brits, but we were never bombed from the f****** skies with nowhere to go! The Palestinians have nowhere to go – it’s their f****** home and they’re bombing them from the sky. If you’re not calling it a genocide what the f*** are you calling it?” read the words projected by Mo Chara.

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Kneecap came under renewed scrutiny at the start of this month when UK intelligence said they would investigate comments made by the rap group about UK and Middle East politics.

They were reported to police over footage from a 2024 concert in which a band member appeared to say: “The only good Tory is a dead Tory. Kill your local MP.” Footage from another concert, in 2023, appears to show a member of the trio shouting “Up Hamas, Up Hezbollah” – the UK considers both to be “terrorist” organisations.

In response, Kneecap said it had “never supported Hamas or Hezbollah,” and accused “establishment figures” of taking comments out of context to “manufacture moral hysteria” because of the band’s criticism of Israel’s attacks on Palestinians in Gaza.

Several Kneecap gigs have been cancelled as a result of the controversy, and some British lawmakers have called on organisers of June’s Glastonbury Festival to scrap a planned performance by the group.

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