Chinese commercial banks fear stimulus measures will do little to stem tide of mortgage prepayments, squeezing margins

China’s commercial banks are raising questions about whether the central bank’s recent cut to outstanding mortgage rates will be sufficient to hold back a flood of mortgage prepayments and help protect bank margins.

The People’s Bank of China (PBOC) unveiled new guidance last month requiring commercial banks to lower interest rates on outstanding mortgages for first-home loans. The new rates, which will be effective starting on September 25, aimed at stimulating consumption while also…