Wendy Zhang/ Shanghai Daily news

Banks in Shanghai raised their thresholds for loans used to purchase second-hand homes to minimize the bad-debt risks, Shanghai Morning Post reported today.

Second-hand property agencies are required to have an upper-limit on their bad-debt ratio. Banks will usually terminate cooperation with agencies that have a bad-debt ratio exceeding 0.8 percent. Some smaller agencies are required to have a ratio below 0.1 percent, said an industry analyst.

Many banks are strictly monitoring the approval of loans used for second-hand homes. The Bank of Construction and China Minsheng Banking Corp Ltd have stipulated that loans will only be given for second-hand homes constructed no more than ten years ago, with most offering a maximum loan of 60-70 percent of the house price.

Mortgage holders of two properties are required to pay more than 40 percent of a house's price as an initial payment if they want to purchase a third residence, according to a local branch of Bank of China.