China’s residential mortgage-backed securities market has shrunk by almost two-thirds over the past year after a wave of early repayments from property owners that highlight the country’s constrained investment landscape. The size of the market was Rmb363bn in March compared with more than Rmb1tn a year earlier, data from Fitch Ratings shows. Pre-payments leapt last year and are rising again, according to the rating agency.
Tracy Wan, a director at Fitch Ratings, said the agency initially thought the pre-payment spike was a “one-off” from the policy change, given that banks in China may in many cases refinance an entire loan at lower rates. But the “acceleration” this year could partly be driven by customers choosing to deploy cash to pay down their debts rather than actively investing. “Even before , we have been seeing a steady increase in the pre-payment .