China said to plan crackdown on loans for home down-payments

[BEIJING] Chinese regulators plan to impose new rules to end the practice of homebuyers taking out loans to cover down-payments, as they step up financing risk in the property market, according to people familiar with the matter.

The rules will bar lenders including developers, housing agencies, small-loan companies and peer-to-peer networks from offering loans for down-payments, said the people, who asked not to be named because the matter isn't yet public.

Regulators including the central bank and the China Banking Regulatory Commission will also ask commercial banks to scrutinise mortgage applications and reject those where down-payments come from loans offered by such institutions, the people said.

China is planning the crackdown amid concerns about rising risks in the loan markets and warnings from officials that home prices in some top-tier cities are rising too fast.

Shanghai's most-senior official said the city's property market has "overheated" and should be more tightly controlled after a recent surge in residential housing prices.

As part of the latest moves, regulators will also strengthen the stress tests of property loans, the people said, without offering details. Representatives at the People's Bank of China and the CBRC didn't immediately respond to faxed requests for comment.

BLOOMBERG