Sept. 28 (Bloomberg) -- China raised interest rates on some mortgages and increased minimum down payments to curb property speculation after real-estate prices rose last month at their fastest pace in more than two years.

Loans for second homes and commercial sites will be charged at least 1.1 times the benchmark lending rates, from 0.9 times, the central bank said late yesterday. Down payments will rise to 40 percent, from 30 percent, for housing loans and to half a property's value for commercial real estate.

The measures underscore the failure of five increases in the benchmark rate this year to cool property investment and lending in the world's fastest-growing major economy. Housing prices in 70 major cities rose 8.2 percent last month, the biggest gain since the government began the monthly survey in August 2005.

``The immediate impact will be a reduction in demand for properties, but it will be short-lived,'' said Zhang Luan, an analyst at Haitong Securities Co. in Shanghai. ``As long as liquidity floods the economy, investors will keep pumping money into real estate.''

The latest cooling measures come after new taxes, higher mortgage rates and down-payment ratios imposed since 2005 failed to prevent prices rebounding. Investment in real-estate development jumped 29 percent in the first eight months of 2007.

`Behind the Curve'

``It's clear they know they're behind the curve, in a hole, at risk of people taking more of their money out of bank deposits and going into other assets where there is already frothiness,'' said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington.

Household savings in China dropped for two straight months in July and August as people switched money to a stock market that the government is also trying to cool.

The central bank raised its one-year lending rate for the fifth time this year on Sept. 14, to 7.29 percent. Those increases have failed to damp demand for property as economic growth raises incomes and people prefer fixed assets amid inflation at a 10-year high of 6.5 percent.

China's economy may expand 11.6 percent this year, faster than an earlier estimate of 10.8 percent, the People's Bank of China's research department said today. Consumer prices will rise 4.6 percent, up from a previous 3.2 percent forecast.

China Vanke Co., the nation's biggest listed property developer, led builders lower for a second day yesterday on anticipation of government moves to limit lending. It fell 0.61 yuan, or 2 percent, to 29.25, extending a 5.3 percent decline on Sept. 26.

`Nervousness'

The changes are ``a reflection of the central bank's anxiety and nervousness,'' said Lei Wang, co-manager of the $14.5 billion Thornburg International Value Fund in Santa Fe, New Mexico. ``They don't want to see prices go out of control.''

Wang's fund owns shares of Country Garden Holdings Co., China's most profitable property developer.

In the southern city of Shenzhen, which borders Hong Kong, average new home prices rose 18 percent in August, accelerating from 16 percent a month earlier. In Beijing, average home prices rose 14 percent last month.

In addition to one-year rates, the central bank sets benchmarks for longer durations. On Sept. 14, the benchmark rate for a five-year loan rose to 7.83 percent from 7.56 percent.

China Construction Bank Corp. Chairman Guo Shuqing said this week the company, which controls about 22 percent of the nation's home-loan market, has reduced real-estate advances in areas where property prices have risen ``too much.''

Outstanding mortgage loans in China rose 20 percent in the first quarter to 2.4 trillion yuan ($319 billion), faster than the 16 percent growth in total loans. Non-performing mortgage advances totaled 19.2 billion yuan by the end of 2006, up from 18.4 billion yuan a year ago, according to the central bank.

To contact the reporters on this story: Luo Jun in Shanghai at at jluo6@bloomberg.net; Nipa Piboontanasawat in Hong Kong at at npiboontanas@bloomberg.net

Last Updated: September 28, 2007 00:34 EDT