Mainland homebuyers could face higher financing costs this year as lenders are expected to raise mortgage rates to curb housing speculation, and help with the country’s nationwide efforts to slash debt. In 35 major cities, average mortgage rates for first-time homebuyers rose to 5.38 per cent in December, up 0.93 percentage points than a year ago, according to financing and loan service site Rong360. The average rate is the equivalent to 1.1 times the benchmark rate set by the central bank. “In major cities in China, including tier-one cities, mortgage rates are rising in tandem with rising funding costs for banks themselves,” said Li Weiyi, an analyst at Rong360. Looking ahead, there is little likelihood of seeing any turnaround, and banks are expected to further raise rates, though at a slower pace, to continue with the market’s ongoing home price tightening policy, Rong360 said in a research note. Xia Dan, a senior researcher at Bank of Communications in Shanghai, also said the mortgage policy is likely to tighten, as banks attempt to lower the risk of any housing “bubbles” forming by raising the bar higher again for home seekers. “We have seen the tightening measures expanding from second-home buyers to first-time buyers, from core, top-tier cities to smaller ones,” she said. “Such steps could hurt home seekers genuinely buying properties to live in, instead of for speculation, but the measures are effective in helping China to trim debt levels.” Though there may not be an official limit on how much banks can extend mortgages this year, they are expected to trim their exposure either by reducing extensions, or contributions to their own loans, Xia added. Financial regulators in China are keen to trim debt levels at banks and other financial institutions to ward off financial risk. In Beijing, banks are already charging between 1.05 and 1.3 times the benchmark rate to first time buyers. In Shanghai, however, discounts on mortgages rates, ranging between five and 10 per cent are still available for first-time buyers, but it’s likely such preferential rates will be stopped this year, analysts say. In Shanghai, average mortgage rates for first-time homebuyers are 1.02 times the benchmark rate set by the central bank in December, while for second-time homebuyers it is 1.11 times the benchmark, according to Rong360 data. Banks in major cities, including Shanghai and Beijing, are required to charge at least 1.1 times the standard mortgage rate for second-time homebuyers to curb speculation.