The penalties charged by domestic banks to people returning housing loans ahead of schedule have raised disputes, today's Oriental Morning Post reported.

The recent interest rate hikes have encouraged many people to re-pay their loans in advance, especially for mortgage holders.

When she decided to return her housing loans in advance to the Bank of China, Yu, a Shanghai resident, was told to pay an additional monthly interest rate as a penalty.

"I decided to return the loans to two banks ahead of schedule- China Minsheng Bank and Bank of China (BOC), but I received two quite different replies," Yu said, "I can return the loans to Minsheng anytime I like without paying penalties, while BOC asked me to pay an additional one-month of interest as a penalty," she pointed out.

Therefore, Yu complained to the consumer's protection commission in the Pudong New Area, which supported Yu's viewpoints. The BOC had deprived Yu's freedom to return the loans in advance, according to the commission.

However, the Bank of China held a different view. "The People's Bank of China has authorized all the banks to establish their own lending regulations," said a spokesman with the BOC, adding that preventing mortgage holders from returning loans in advance might bring more risks to the banks.

Consumers can select different banks with different lending regulations in the light of their own requirements, he stressed.

For property lending contracts effective for less than one year, the BOC will charge an additional one-month of interest as a penalty for early pay-off, and the Industrial and Bank of China will charge five percent of the remaining principal as penalty.

Source: Shanghai Daily