Core Viewpoint - Despite significant declines in housing prices, very few individuals are opting to default on their mortgages, indicating a strong psychological and financial commitment to maintaining their obligations [2][8]. Group 1: Psychological Factors - Many individuals express anxiety over falling housing prices but are reluctant to default due to the severe consequences, including loss of savings and family financial stability [3][7]. - The fear of facing failure and the associated shame plays a crucial role in the decision to continue making mortgage payments, even under financial strain [6][7]. - The burden of mortgage payments is often prioritized over other living expenses, reflecting a deep-seated commitment to financial responsibilities [6][7]. Group 2: Financial Implications - Defaulting on a mortgage could lead to severe repercussions such as bank foreclosure, ruined credit records, and increased family pressure, which are significant deterrents for homeowners [6][7][8]. - Many individuals are choosing to endure the financial strain of mortgage payments rather than risk the long-term consequences of defaulting, viewing it as a necessary sacrifice for the sake of family and personal integrity [7][8]. Group 3: Market Observations - The current housing market is characterized by a paradox where prices are declining sharply, yet the rate of mortgage defaults remains low, suggesting a collective resilience among homeowners [2][8]. - The ongoing pressure from mortgage obligations continues to weigh heavily on individuals, creating a sense of walking a tightrope where the fear of falling into default looms large [8].

Core Viewpoint - The Chinese real estate market is facing significant pressures on both supply and demand sides, with rising mortgage default rates and ongoing challenges for property developers [1] Demand Side - The national average mortgage default rate has increased to 3.7%, up from 1.6% in 2022, with some third and fourth-tier cities exceeding 5% [1] - Factors contributing to this trend include declining employment quality and falling property prices, with some properties losing value below their loan balances [1] - The market for auctioned properties remains high, with 170,000 residential properties listed for auction in the first half of 2025, unchanged from the previous year, while transaction volume decreased by 2.3% to 51,000 units [1] - The average transaction price for auctioned properties is 8,817 yuan per square meter, reflecting a year-on-year decline of 7.8%, with a slight increase in the discount rate [1] Supply Side - Property developers continue to face severe debt issues, with overall financing scales contracting [1] - A peak in debt maturities is approaching, leading to accelerated debt restructuring efforts [1] - Since 2025, there has been a notable increase in debt restructuring among property developers, particularly for overseas debts, characterized by higher debt reduction ratios, extended maturity periods, and lower coupon rates [1] - Debt-to-equity swaps are gradually becoming a primary tool for property developers to manage their debts [1]

Core Viewpoint - The article highlights the increasing difficulty homeowners face in selling properties due to the inability of sale proceeds to cover outstanding mortgage payments, leading to a situation where many owners find themselves unable to sell their homes [1][3][15]. Group 1: Individual Cases - Yang Qing, who purchased a 60-square-meter apartment for nearly 400 million yuan in 2019, now faces a situation where the expected sale price of 220 million yuan is insufficient to cover her remaining mortgage of over 230 million yuan, requiring her to find additional funds to complete the sale [2][5]. - Wang Bin, who bought a 97-square-meter apartment for approximately 240 million yuan, discovered that the current market value is only around 100 million yuan, leaving him with a remaining mortgage of 120 million yuan and needing to invest an additional 20 million yuan to sell [8][9]. - Ma Yan successfully sold her property but had to borrow 20 million yuan to cover the remaining mortgage balance of nearly 90 million yuan after selling the house for about 80 million yuan, incurring a loss of nearly 60 million yuan [11][13]. Group 2: Market Trends - The article notes a trend where many homeowners who purchased properties between 2018 and 2021 are now experiencing both asset depreciation and increased difficulty in meeting mortgage payments, leading to a rise in the number of individuals unable to sell their homes [15][16]. - The article mentions that homeowners are increasingly considering selling their properties as a means to avoid defaulting on their mortgages, with some opting for strategies like "断供保房" (defaulting to protect the property) as a last resort [16][17]. Group 3: Financial Implications - The financial burden of mortgage payments has become unsustainable for many families, with some homeowners reporting that mortgage payments consume a significant portion of their income, leaving little for other expenses [6][12]. - The article discusses the challenges faced by homeowners in securing loans to cover mortgage payments, as many do not meet the requirements for additional borrowing, further complicating their financial situations [16][17].

Core Insights - The banking sector is showing a shift in attitude towards mortgage defaults, with banks now more willing to negotiate with borrowers rather than pursuing foreclosure aggressively [1][3][4] Group 1: Changes in Bank Behavior - Banks are increasingly reluctant to foreclose on properties, opting instead to work with borrowers who are struggling to make mortgage payments [1][4] - Recent data indicates that the number of mortgage defaults is significantly higher than the number of foreclosures, suggesting a change in banks' strategies [3][4] - The trend of declining foreclosure rates is evident, with a reported decrease of over 20,000 properties available for auction in 2024 compared to 2023 [4][6] Group 2: Market Conditions and Impacts - The real estate market has shifted, with property values declining and making it difficult for banks to sell foreclosed properties at a profit [4][6] - In second and third-tier cities, the clearance rate for foreclosed properties is low, with banks struggling to sell even a fraction of the properties they list [6] - The Basel Accord regulations require banks to maintain a certain level of high-quality assets, which influences their decision to keep non-performing loans on the books rather than foreclosing [6] Group 3: Implications for Borrowers - Borrowers facing difficulties are encouraged to communicate with their banks, as many banks are willing to offer flexible repayment options to avoid foreclosure [8] - In regions with stronger real estate markets, such as Jiangsu and Zhejiang, banks are still likely to pursue foreclosure if borrowers default, indicating a regional disparity in bank practices [8]

Core Insights - The mortgage default rate in China has risen to 4.7% in July 2025, marking a 0.3 percentage point increase from June and continuing a four-month upward trend, particularly affecting third and fourth-tier cities where the rate has reached 6.8% [1][2] - Economic pressures, including a GDP growth rate of only 4.8% in the first half of 2025, have contributed to declining household income growth, which has fallen to 3.2% compared to 5.8% in the same period of 2022, impacting repayment capabilities [1][2] - The continuous decline in housing prices, with new home prices down 5.7% and second-hand home prices down 6.9% year-on-year, has exacerbated the situation for homebuyers, leading to increased default intentions [2][4] - The financial stability of the banking sector is under threat, with the non-performing loan rate for real estate-related loans rising to 3.7%, and potential new non-performing loans exceeding 400 billion yuan if defaults continue [4][6] - Government and financial institutions are implementing measures to stabilize the real estate market, including lowering down payment ratios and adjusting mortgage interest rates [4][6] Economic Factors - The economic downturn is a significant factor, with the National Development and Reform Commission reporting a GDP growth target of 5.2% for 2025, which has not been met [1][7] - The decline in household income growth has directly affected repayment abilities, particularly for high-debt families where mortgage payments exceed 50% of their income [1][2] Housing Market Dynamics - The ongoing decline in housing prices has led to a significant number of homebuyers facing negative equity, with some cities experiencing price drops exceeding 15% [2][4] - The number of unfinished housing projects has surpassed 380, affecting nearly 390,000 homeowners, contributing to the rising default rates [2][4] Financial Sector Response - Major banks have increased provisions for potential bad loans, with state-owned banks setting aside over 280 billion yuan in the first half of 2025, a 22.6% increase from the previous year [6][9] - Banks are offering various relief measures, including loan repayment extensions and interest rate adjustments, to assist struggling homeowners [6][9] Future Outlook - The future of the mortgage default rate will depend on macroeconomic recovery and stabilization of the real estate market, with expectations that policy effects will lead to a peak and subsequent decline in default rates by the end of the year [7][9] - The transition from the previous housing market model to a more sustainable development framework is essential for addressing the underlying issues of mortgage defaults [9]