Banks in Shanghai are following the central government's call to tighten their mortgage policy by imposing a down payment of at least 50 percent on second homes and requiring home buyers to pay an extra 10 percent on interest rates.

Lenders are also considering measures on third or more homes, they said yesterday.

Banks can stop offering loans to buyers of third or more homes, according to the notice issued over the weekend by the State Council, China's Cabinet.

Credit officers at some banks have suspended the vetting of new mortgage applications as they wait for clear instructions from their headquarters and the regulator on third or more home mortgages.

Banks, including the Industrial and Commercial Bank of China, have suspended offering 30 percent discount on interest rate even on first homes, which is tighter than the state requirement.

Separately, Ping An Bank has sharply cut its real estate loan exposure due to a conservative policy, its president said yesterday.

The Shenzhen-based bank's property development loan portfolio has been trimmed to 3 percent at the end of 2009 from 2007's 36 percent.

"We significantly cut our real estate development exposure in the last couple of years," Richard Jackson, president of the bank, said yesterday at a media briefing in Shanghai. "We're relatively conservative, perhaps more conservative than our rivals, on real estate loans in general."

The bank's individual mortgage portfolio has dropped to 11.9 percent last year from 22 percent in 2007, he said.

The bank, under Ping An Insurance (Group) Co, reported a 25.2 percent drop in net profit to 1.1 billion yuan (US$161 million) in 2009 mainly due to narrowing interest margin and more funds invested for expansion.