(Yicai) Dec. 2 -- Lenders in Hangzhou and a number of other major Chinese cities are raising mortgage rates in response to a rebound in their local housing markets. More are expected to follow suit.

Banks in Hangzhou, the capital of Zhejiang province, hiked mortgage rates on first homes twice in the past two months to 3.1 percent from 2.9 percent, according to real estate agents. Similar increases were also made by lenders in cities such as Nanjing and Wuhan.

China’s real estate market is showing signs of a recovery following a prolonged slump, with pronounced upticks in new and pre-owned apartment sales. The upturn has come since September when the authorities took steps to steady the market, such as easing mortgage rates, lowering down payment requirements, relaxing purchase restrictions, and reducing deed taxes.

Mortgages are a long-term, stable source of income for lenders. So now they are raising rates to boost the returns on interest-bearing assets, said Yan Yuejin, deputy head of the Shanghai branch of the E-House China Research and Development Institute.

As of Sept. 30, net interest margins, or the difference between what a bank earns on loans and what it pays on deposits, were below the warning line of 1.8 percent at state-owned banks, joint stock banks, city and rural commercial lenders, and foreign banks, according to data from the National Financial Regulatory Administration.

Surging new home sales in Shenzhen highlight the broader trend of rising property transactions, contributing to both the market’s recovery and the potential for further rate hikes by banks.

Sales in the southern tech hub reached 7,475 last month as of Nov. 28, up 133 percent from October, according to the Leyoujia Research Center. The average price achieved was CNY49,000 (USD6,745) per square meter, a 2.1 percent monthly increase.

Editor: Futura Costaglione