China's commercial banks are reining in property loans, with some even raising previously preferential interest rates to the benchmark level, the 21st Century Business Herald reported Wednesday.

Interest rates for property loans were raised to 85 percent of the benchmark interest rate, up from 75 percent in late 2010, and rates are expected to continue rising, the newspaper reported.

"Many banks are hoping to have a better say on pricing. Discounts on interest rates for general loans were limited to 10 percent, and the limit for personal property loans was 15 percent," said an insider from a State-owned bank. "But now banks voluntarily want property loans to be more in line with other general loans."

Commercial banks in Nanjing such as China Merchants Bank, Industrial Bank and Everbright Bank have increased interest rates on property loans to the benchmark level, the paper reported, citing other media reports.

The newspaper attributed banks' moves to a shrinking lending quota, as well as pricing.

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The country's lending quota is expected to drop 10 percent to 20 percent year-on-year in 2011, resulting in a scale-back personal loan quota. Banks also are tightening control on lending at their branches, and would punish those who cross the line, the paper said.

Meanwhile, banks are weighing on the profitability among different types of loans. Some banks said the profit level for property loans are not as high when interest rates for this segment returned to 85 percent of the benchmark interest rates.

"There are opportunity costs. Lending profits in other sectors exceed that in personal loans," said an insider from the joint-stock bank in Hangzhou.

However, with property loan interest rates on the rise, more home purchasers choose to pay with a lump sum.

The proportion of home buyers paying with a lump sum increased about 30 percent in Shanghai after the property loan policy was tightened in April 2010, especially for buyers from abroad, according to Shanghai Yung-Qing Rehouse.

Meanwhile, property transaction volumes in major cities rose in the first half of January, with volumes in Wuhan, Nanjing, Tianjin rising more than 20 percent, according to the China Index Academy.