(Bloomberg) -- China’s stock of mortgages contracted to the lowest level in nearly three years, underscoring weak confidence in the property sector that’s weighing on growth.
The amount of outstanding mortgages fell to 37.8 trillion yuan ($5.3 trillion) at the end of June, the lowest since September 2021, according to data published by the People’s Bank of China on Friday. That’s about 3% less than their peak at the beginning of 2023, indicating that households had repaid more debt than they had taken out since then.
It’s a worrying sign that households and businesses are refraining from borrowing and spending, which could deepen a deflationary spiral and the persistent property slump. Economists at banks including UBS Group AG increasingly see China’s growth target of around 5% slipping away.
The data comes as officials are considering allowing homeowners to renegotiate terms of their mortgages with their lenders or refinance with a different bank, Bloomberg News reported. Such a move would alleviate the borrowing costs of existing mortgages for millions of families, potentially boosting consumption and discouraging early mortgage repayment.
The average rate of newly issued mortgages has declined to a record low of 3.45% after rounds of policy moves. But many families are still choosing to pay down debt early because investment returns have also plummeted.
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