The golden era of mortgage rate discounts has passed, and potential homebuyers are now left waiting for the tight credit policy to drive down prices before they can afford a mortgage.

In Shanghai, that's proving to be a long wait for many.

Across the city, Bank of China, China Construction Bank and several other lenders are demanding a 5 percent premium over benchmark interest rates on mortgage loans to first-time home buyers. Those are much harsher terms than the 30 percent discount rate previously available to people deemed to be buying a home for a roof over their heads rather than for property speculation.

"We are following an order from headquarters on the premium policy," said a Construction Bank official in Shanghai.

The bank, the biggest mortgage lender in China, was the first major bank to slap such a premium on mortgage rates for first-time homebuyers.

Smaller banks, including Bank of Ningbo, are demanding a 10 percent premium, while Shenzhen Development Bank said it has suspended mortgage lending in Shanghai.

Even at lenders like China CITIC Bank, which hasn't yet posted a clear policy on rate premiums, it's almost impossible for first-time homebuyers to get lower benchmark rates. Lenders have fewer loan resources amid China's tight monetary policy.

Credit controls are designed to deflate the bubble in China's real estate market, drive down home prices and give renewed hope to people who can't afford to buy a home.

However, homebuyers now find themselves caught in the middle of tighter credit and stubbornly high home prices. Those who anticipated as much as a 30 percent drop in housing prices have thus far been sorely disappointed.

The latest data from the National Bureau of Statistics showed that home prices in 24 of China's 70 biggest cities rose in September from August despite the curbs. On a year-on-year comparison, only the city of Wenzhou in Zhejiang Province reported a drop in home prices - but only 0.5 percent.

Economics tells us that it takes awhile for credit changes to ripple down to prices. But that doesn't make it seem any fairer to those wanting to own a roof over their heads.

"Smaller lenders are being burned out of loans amid the credit controls," said Xiao Wang, a Bank of Communications credit officer at a sub-branch office. "We still have loans, but not adequate enough."

Shanghai-based Bank of Communications, which is still charging benchmark rates on first-home purchases, is doing less lending.

"We have capital available for only a half-day each month," she said. "Once it's used up, we have to wait for another month for headquarters to dispatch new capital."

China has tightened its monetary policy repeatedly since the end of 2010 to fight inflation. The central bank has raised its benchmark interest rates five times since October 2010 and ratcheted up its reserve requirement ratios nine times.

That's left homebuyers with higher lending costs and less lending available.

In September, new bank lending dropped to a 21-month low of 470 billion yuan (US$73 billion). That was down 113.1 billion yuan from a year earlier and 78.5 billion yuan less than in August.

In the first three quarters of the year, bank financing also shrank to 9.8 trillion yuan, a decline of 1.26 trillion yuan from the same period last year.

"Overall, the data point to tighter financing conditions," said Chang Jian, a Barclays Capital economist.

China's total financing, which includes loans, bonds and equities, accounted for 58 percent of financing in the first nine months of the year.

The central bank has begun to disclose total financing data on a quarterly basis to give a clearer picture of monetary conditions in the country. So far, only home sales, not prices, seem to have responded to monetary policy.

"Chinese developers face the challenge of lower-than-anticipated cash flows arising from slowing sales amid ongoing challenges in securing sufficient credit from banks," Moody's said in a research note earlier this month.

"The situation will continue for the next six to 12 months as the Chinese government is unlikely to relax the regulatory initiatives it has undertaken to restrict property purchases."

Yao Wei, a Societe Generale economist, echoed that view.

She said credit growth in the housing market has continued to fall but there is no indication that tightening policies will be relaxed.

Some read the September housing data as a sign of the policies beginning to bite. One more city reported a decline in September among the 46 cities where housing prices fell or remained unchanged.

Yao said there are clearer signs of cooling in China's property sector. Residential sales volume increased by 9.5 percent year on year in September. That's a drop from the 13.5 percent recorded in August.

"September probably marked the beginning of a correction, but the central government wouldn't want to stop tightening just yet," she added.

The national statistics bureau said that China's home prices are moving in the direction the government wants to see, but the government needs to cement housing price results, indicating a still hawkish stance from the authorities.

Societe Generale says it thinks the government is aiming at a target price correction of 5 percent to 10 percent.

"If we read the government correctly, we are still a few more months away from general policy easing," Yao said.

"Considering the difficulties of managing the pace of deflating a bubble, we expect risk of 10 percent to 20 percent downside in China's property prices."

The prospect of a big drop in property values is causing some concern among those who bought homes at what may turn out to be the top of the market.

Yuan Jie, a homeowner in Shanghai, was rattled by news that three property developers have offered 30 percent discounts on new housing projects in the outer-ring road region in Pudong New Area. That news triggered a rush of angry homeowners flocking to developers' sales offices last weekend, asking for refunds or cancellation of existing contracts.

"On the one hand, it was lucky for me that I got an interest rate discount when I bought my apartment at the beginning of this year," the 30-year white-collar worker said. "Now I am worried about whether an across-the-board price cut will hit the value of my home."