BEIJING/HONG KONG (Reuters) - Chased by debt collectors over a mortgage delinquency in a southern Chinese city, former finance worker Lei Xiaoyu no longer answers her phone as she tries to delay the inevitable.

"It's my only house and I don't want it foreclosed. But what can I do?" said the 38-year-old, who in late 2022 lost her job and stopped repaying the mortgage and credit card debt she took to buy a 1.3 million yuan ($181,139) home in Huizhou.

"I feel like I wasted my youth," she said, regretting the purchase seven years ago.

The number of Chinese in Lei's situation is small, but rising fast, as growth in the world's second-largest economy remains patchy and fragile due to a property sector crisis, mounting local government debt and fears of deflation.

Rising mortgage delinquencies could have negative spillovers on both property prices and consumer confidence, analysts say, further complicating China's efforts to boost household demand and bring its economy on a more solid footing.

The number of foreclosed homes in China rose 43% year-on-year in 2023 to 389,000, said China Index Academy, a major independent real estate research firm. More than 50,000 other units were foreclosed in January, up 64.4% year-on-year, the firm said.

"It has a certain shrinking effect on consumption and also serves as a warning that excessive investment (in property) should be avoided," Hwabao Trust economist Nie Wen said.

Lei is in no mood to spend money.

She made about 40,000 yuan last year selling goods via livestreaming, not enough to make any of the 4,200 yuan monthly mortgage payments and barely enough for basic living expenses.

"All the clothes I wear are from five years ago, but I've gained weight and many no longer fit me. My friend gave me one of her old coats. I haven't travelled since 2017," said Lei.

Not being able to support her mother who lives on a 3,000 yuan monthly pension upsets her the most.

MORE AUCTIONS COMING

Data from China Index Academy showed a total of 99,000 foreclosed units were sold at auctions in 2023 for a combined 150 billion yuan.

Duan Chenglong, a manager at Beijing Xiangpaipai Information Service, a firm that specialises in foreclosures, says those auctions were the result of debt disputes two- to three-years old, meaning the trend is likely to pick up pace.

"The post-pandemic economic environment hasn't been good, with many defaulting on their mortgages, including due to job issues," said Duan. "There is still a gap between the volume of properties being auctioned and the amount of distressed assets."

More auctions in the future will distract would-be buyers from the regular market, which could weigh on prices for both new and second-hand homes, Duan said.

In some cities in China, some auctions of foreclosed homes have repeatedly failed.

The ratio of mortgage-related non performing loans in the Chinese banking sector is estimated at only 0.4%, meaning lenders can tolerate writing off some of these assets.

But the failures highlight the excess housing supply built up during the boom years of the property sector, which accounted for about a quarter of economic activity at its peak in 2021.

Xin, a 30-year-old single mother from Zhumadian, in the central Henan province, lost her flat after she mortgaged it to start a child entertainment business, which failed within weeks due to COVID-19 lockdowns in 2020.

The property, valued in 2019 at 310,000 yuan, was auctioned twice in the past year for the 170,000 yuan Xin owes to the bank, but failed to attract any bids.

"Who would buy it? There are more than 10 flats up for auction in the same building," said Xin, who only gave her surname, citing privacy reasons.

($1 = 7.1768 Chinese yuan renminbi)

(Additional reporting by Ziyi Tang, Joe Cash and the Beijing Newsroom and Clare Jim in Hong Kong; writing by Marius Zaharia; editing by Lincoln Feast.)