Banks in China told to stop third-home loans

The China Banking Regulatory Commission (CBRC) has ordered all banks in four key cities, including Hangzhou, Shenzhen, Shanghai and Beijing, to stop offering mortgage loans for third home purchases, according to Reuters.

Meanwhile, banks in other cities must increase down payments to 60 percent for third-home loans, and buyers will be charged mortgage rates 50 percent higher than the central bank's benchmark.

CBRC also started a new series of stress tests on property lending in the country last month, after completing the first wave of stress tests earlier this year, proving that the 30 percent decline in home prices can be absorbed by banks.

“If the news of a second stress test is true, that means the central government may expect a worse correction in the mainland property market,” said Liao Qun, chief China economist for CITIC Bank International, which was carried in Reuters. "But I don't think home prices will fall so sharply now."

Holly Hou, an analyst at Sun Hung Kai Financial Group, also told Reuters that new curbs on mortgage loans for third-homes may emerge after several lenders loosened their mortgage lending activity, leading to a slight increase in mortgage transactions in some Chinese cities.