(Yicai Global) June 28 -- Early mortgage repayments climbed to a five-year high in China at the end of the first quarter, according to a recent report by Fitch Bohua, a unit of Fitch Ratings, which also predicted a new record high for this quarter. 

The rate of early repayments was 14.45 percent at the end of March, up from 8.45 percent the previous quarter, the report showed.

In the past, the major driver for early home-loan repayments was the sale of pledged properties and loan settlement, Fitch Bohua noted, but since last year, against the backdrop of a sluggish property market, the incentive have changed to reducing interest costs, it added.

Falling deposit and lending rates are unlikely to have an impact on mortgage borrowers deciding to repay ahead of time, Zheng Fei, deputy director of Fitch Bohua's structural financing department, told Yicai Global. After reaching new highs, the rate of early repayment will eventually return to the long-term average, Zheng said.

Despite cuts in the benchmark loan prime rate since 2019, early repayments will likely jump again this quarter because of low expectations about future incomes, a poor yield from investment and financial products, and lagging effects, shrinking the scale of banks’ outstanding home loans, Fitch Bohua pointed out.

Editor: Martin Kadiev