The former preferential housing loan policy began in October 2008 when China was hit by the global financial crisis. The 30 percent discount on housing loan interest rate was one of China's major moves aimed at promoting domestic consumption and boosting the economy. Our reporter explains why the loan policy has been eliminated and what has been suggested for the future.

The People's Bank of China announced plans last year to cancel the discount on the purchase of second properties, but had no such plans for a first home.

However, discounts for the purchase of a first home have become a rare thing in the current housing market.

Insiders say the banks have canceled the preferential policies to serve their own needs.

Guan Chunru, Manager of Shanghai Pudong Development Bank, said, The loan business this year is limited because of new property restriction policies. Banks will have a tough year. That's why some banks have canceled the discount to ensure profits.

Analysts note the required reserve ratio has been raised to 19 and a half percent in major commercial banks and 16 percent at small and medium-sized banks. The increasing required reserve ratio has made it more difficult for banks to lend money. This is the major reason behind the elimination of loan discounts.

But at the same time the personal loan ratio has jumped by 20 percent in recent years. And the canceling of the 30 percent discount will bring banks another 378 billion yuan in profit in 2011.

Potential first home buyers are the hardest hit. Some have had to postpone their purchasing plan while others are choosing government-built properties.

But experts think this may not be a good way out.

Prof. Dongfan, Beijing Normal Univerisity, said, The government IS accelerating the construction of low-income properties to help low-income residents. But the number is still far from being able to meet the huge demand. Urgent buyers may find it too long to wait.

Some analysts say first home buyers are actually the biggest victims of the housing restriction policy.

Analyst Yin Zhongli said, Against the backdrop of the crackdown on housing speculation, actual property buyers are the innocent victims. They sort of become the target of the restrictions.

Yin Zhongli also suggests the government figure out a way to tackle the property speculation more effectively to avoid hurting more innocent home buyers.

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