China’s homeowners are rushing to pay off mortgages early as outlook on the economy dims

Li Wen, a human resources director at a state-owned enterprise in Nanchang, Jiangxi province, paid off an outstanding 200,000 yuan (US$28,170) on her home loan ahead of schedule in January, soon after she received her annual bonus at work.

The 36-year-old had been repaying her loans, totalling 600,000 yuan, in advance for the past few years, even after the interest rate was reduced to 4.3 per cent from the original 5.39 per cent following a few rounds of rate cuts since last year.

“Depositing the money in banks does not do anything for me,” Li said. “Deposit rates are far lower, and we do not have any ideal high-yield investment options.”

“I would rather pay my loans earlier to save the interest cost, especially when salary and job cuts are getting common.”

Li’s concerns are shared by many homeowners in China, who had bought homes in a red-hot market in high hopes of appreciation, before prices started to slide.