China's banking regulator said on Sunday that banks should not extend loans to home buyers who intend to use the money for speculative purposes.

Lenders should increase their awareness about financial risks and raise the down payment ratio "by a large margin", said the China Banking Regulatory Commission (CBRC) in a statement.

Down payment ratio of a second or more houses should be no less than 40 percent and the interest rates should be strictly in line with risks, according to the statement.

The action is the latest in a campaign by the central government to dampen China's overheated property market.