(Yicai) May 28 -- Shanghai has become the first of China’s first-tier cities to cut interest rates on home loans after the country’s central bank eased housing market restrictions earlier this month.

The city trimmed the minimum rate on first-time home mortgages to 3.5 percent from 3.85 percent, according to a policy document released yesterday. The minimum rate on second home mortgages was cut to 3.9 percent from 4.25 percent.

Shanghai also reduced the minimum downpayment for first and second home purchases to 20 percent and 35 percent of the property’s price from 30 percent and 50 percent, respectively.

The new policy lowers mortgage rates for second homes more than for first homes and will further bolster expectations that the real estate market is stabilizing, said Lu Wenxi, an analyst at Shanghai Centaline Property. Shanghai's property transactions will likely rebound next month, Lu predicted.

Nearly 4,600 second-hand homes were sold in Shanghai between May 13 and 19, a 2.1 percent increase on the previous week, according to data from the Shanghai Real Estate Center, after the People’s Bank of China moved to ease its housing policy on May 17.

Mortgage rates in China are at historic lows, but first-tier cities have been cautious, keeping rates at high levels because their housing stocks and stock gains are different from lower-tier cities, an expert told Yicai.

Meanwhile, the Shanghai districts of Baoshan, Fengxian, Jiading, Jinshan, Qingpu, and Songjiang, as well as Lingang New Area, will continue with different housing policies: the lowest rate on second home mortgages is 3.7 percent with a downpayment of at least 30 percent, down from 4.15 percent and 40 percent, respectively.

Shanghai also raised the housing provident fund loan quota for first-time homebuyers to CNY1.6 million (USD225,110) from CNY1.2 million and for second homebuyers to CNY1.3 million from CNY1 million.

Other measures included cutting to three from five the number of years non-permanent residents need to have paid into the city’s social security system in order to qualify to buy homes there.

Editor: Futura Costaglione