Chinese banks have started to tighten mortgage lending, after the government indicated that it would curb excessive credit and check speculative investments in the property sector.

Bank of China (BOC), the nation's third largest lender by market value, said yesterday that it has cut the discount on mortgage rates offered to individual borrowers in an effort to improve its loan structure.

The bank, however, did not say to what extent it intends to scale back the preferential interest rates, but said it would decide permissible rate levels based on the credit history of clients.

Reports indicate that the bank has cut the mortgage rate discount for first-home buyers to 15 percent from 30 percent and has suspended offering mortgage loans to second-hand home buyers through real estate agencies.

Other major lenders like the Industrial and Commercial Bank of China (ICBC) and China Construction Bank, have restricted mortgage loans, and want borrowers to pay more down payments or settle for small mortgage rate discounts.

The regulator had allowed lenders to offer as much as a 30 percent discount to the benchmark rate for first mortgages in a move to stimulate the lackluster real estate market in late 2008 when the global financial crisis was at its worst.

But with rising concerns of asset bubbles and inflation at the beginning of this year, the government has been forced to take steps to cool the red-hot property market and curb lending.

Liu Mingkang, chairman of China Banking Regulatory Commission, has urged Chinese banks to keep a close watch on developments in the property market and said the regulator would increase its supervision of property loans amid the increasing risk of asset bubbles.

The banking regulator has also urged banks to increase the down payment requirements for mortgages loans on second homes to 50 percent from the current 40 percent and increase mortgage rates to 110 percent of the benchmark rate. In China, the rate for five-year loans stands at 5.94 percent.