New individual mortgages in Shanghai dropped further in July on the back of a sluggish housing market.

Banks in Shanghai extended 270 million yuan (US$39.7 million) of credit that individuals used to leverage home buying last month, compared with 11.7 billion yuan a year ago and 3.1 billion yuan a month ago, the Shanghai headquarters of the People's Bank of China said in a statement yesterday.

"Individual home credit kept shrinking against sluggish home transactions following the central bank's stringent housing policy," the central bank said.

China's regulators have been tightening the screws on mortgage lending to curb realty speculation since April.

Banks must ask for higher down payments and higher interest rates on second or more homes.

Many banks in Shanghai have also stopped issuing loans for third homes in cities where home prices have soared too fast or too high.

New home sales remained sluggish in Shanghai for the third straight month in July as a result of the government's tighter property policies.

New home sales, excluding those designated for relocated residents, climbed 2.4 percent from June to 430,000 square meters in July, Shanghai Uwin Real Estate Information Services Co said.