Heeding the government's call to rein in runaway property prices, banks are looking to tighten lending by canceling mortgage interest-rate discounts to first-time buyers.

Major banks are expected to take the lead in this initiative, thereby setting a precedent for mortgage lenders in other cities, especially Shanghai, where the property market has been on the boil for the past six months.

The government-inspired interest-rate discount, ranging from 15 to 30 percent, was introduced at the end of 2008 to encourage residential housing sales at the outbreak of the global financial crisis.

Easy credit, combined with an influx of hot money, has driven property prices up across the nation by, on average, 24 percent or 813 yuan per sq m in 2009, according to the National Bureau of Statistics.

In Shanghai, property prices surged 69 percent year on year to hit 20,186 yuan per sq m on average in December, said E-House (China) Holdings Ltd, a property-data provider.

Last year, a total of 937 million sq m was sold in China, 42.1 percent more than in 2008, and 23 percent more than the previous record of 760 million sq m in 2007.

The surge in market sales, together with growing consumer discontent over sky-high prices, prompted the government to fine-tune its credit policy.

Earlier this year the government changed the minimum holding period for property purchasers to qualify for tax-exempt status when selling homes from two to five years. Lending to second-time buyers has also undergone tightening.