Some domestic banks in Shanghai have tightened controls on housing loans to second-hand home buyers as annual quotas have almost been used up while the down payment ratio for some buyers may also be raised soon, Eastday.com reported today.

Minsheng Bank's Shanghai branch has halted mortgages to individual second-hand home buyers since early this month while Industrial Bank now only offers housing loans for houses worth less than five million yuan (US$665,780), the report said.

So far, the Shanghai branches of the Industrial & Commercial Bank of China, Bank of Agriculture, Bank of China and China Construction Bank all have used up their housing loan quotas for the whole year due to a surge in new individual mortgages since May, the report said.

Individual mortgages totaled 7.13 billion yuan in August at domestic banks in Shanghai, up 1.26 billion yuan from July, which was the biggest monthly leap since 2005.

As mortgage quotas are almost all used up, domestic banks canceled some preferential policies for clients and intensified risk reviews on second-hand apartments, the report said.

The report also added that China's central bank is likely to order commercial banks to raise mortgage down payment to at least 40 percent in the last quarter for buyers who intend to buy a second apartment.

The move was intended to curb high default risks from individual mortgages in the wake of the sub-prime mortgage loan crisis in the United States.

Homebuyers may have to make a down payment of 40 percent to buy a second apartment, and for apartments for commercial use, the down payment is expected to be raised to as high as 50 percent.

China's commercial banks were said to have entered a high-risk period for increasing housing mortgage loans, the China Construction Bank, the country's second largest commercial lender, warned in a report released last Friday.

Total non-performing mortgage loans at three major commercial banks – CCB, the Industrial & Commercial Bank of China and Bank of China - rose to 19.2 billion yuan at the end of 2006 from 18.4 billion yuan in 2005, according to CCB.

CCB last week raised the down payment rate to 40 percent in cities in Guangdong, and Hainan provinces and Chongqing Municipality.

Property prices in 70 major Chinese cities jumped 8.2 percent in August from a year earlier after gaining 7.5 percent in July, the National Development and Reform Commission said.

(Shanghai Daily September 26, 2007)