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Chinese bank earnings threatened by early mortgage payments

Borrowers selling investments, taking out business loans to clear housing debts

Residential buildings in Shanghai: There are signs that mortgage holders in China are paying off loans early or taking other lower-interest loans to ease their repayment burdens.   © Getty Images

HONG KONG -- Chinese banks are facing a new earnings challenge as growing numbers of homebuyers pay off their mortgages ahead of schedule, threatening lenders with the loss of years of anticipated interest income.

The scale of mortgage repayment activity and the ultimate revenue impact is hard to glean from official data, but anecdotal evidence suggests that it has been increasing in recent months as borrowers cash out of disappointing investments or raise funds by taking out lower-rate business loans.

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