Shanghai banks have suspended offering third home loans, as the banking regulator requires major cities to tighten home lending. The policies aren't expected to be loosened, until prices drop significantly.

Shanghai banks have suspended accepting applications for third home loans. It comes after the China Banking Regulatory Commission required Shanghai, Beijing, Shenzhen and Hangzhou to stop offering credit to third home purchases at the beginning of August.

Su Xiaojiang, General Manager of Kaisheng Jinglue Shanghai Investment said "For applications for third home loans handed in before August, we are still processing them. For applications handed in after August 1st, we have all rejected them."

Banks say they are strictly following the latest policy. Those who bought two houses then sold out are also considered third home buyers.

Insiders say third home loans have always been good assets for banks, and bring them low risk and good return. Now they have to give up such operations due to regulator's strict requirements. If rapid price growth isn't curbed, policy will remain in place for the longer term.

Hang Jianjun, General Manager of Huayan Group said "If house prices continue to rise in the short time, such policies will be carried on in an even stricter manner. The regulator will look at house price hikes. A growth rate over 10 percent is not wanted."

But some insiders say the policy won't affect third home purchases. Those who can afford third homes are usually able to purchase with cash.