The Caijing website published an article discussing the phenomenon that banks are creating hurdles to prevent people from paying off their mortgage principle earlier than is stated in their schedule.
The online App of a large state-owned bank told its users that early repayment cannot be handled online and that they need to make an appointment for an office visit. However, this type of appointment has a long waiting time. A customer called on January 3 and got an appointment on June 13. Some other banks also have people wait 3 months for an appointment.
Banks prefer customers to follow the mortgage payment schedule so that they can have the interest create a steady cash flow.
People, on the other hand, prefer to pay off their mortgage earlier because, nowadays, the normal financial investment options in China, such as bank’s saving accounts, mutual funds, hedge funds, etc. have a volatile and lower return than the mortgage interest rate. Thus people would rather pay off their mortgage principle.
Source: Caijing, January 19, 2023