* China to set mortgage rates based on LPR from Oct. 8-c.bank
* Rates for first-time home buyers cannot be lower than LPR
* Rates for 2nd-time home buyers cannot be lower than LPR+60bps(Adds details, quotes)
BEIJING, Aug 25 (Reuters) - China will set lower limits onmortgage rates, the central bank said on Sunday, in an apparentbid to curb housing risks following its reform to switch to amarket-based reference rate.
The government has clamped down on speculative investment inthe housing market since 2016 to prevent a sharp correction asprices soared.
There have also been growing concerns that high house pricesare pushing up the cost of business and restricting consumerspending.
Effective from Oct. 8, banks will set mortgage loans basedon the new loan prime rate (LPR) - which has been used as abenchmark for banks to set lending rates, the People's Bank ofChina said in a statement published on its website.
The interest rate on individual mortgage loans forfirst-time home buyers cannot be lower than the LPR, and therate on loans for second-time home buyers cannot be lower thanthe LPR plus 60 basis points, the central bank said.
The central bank will guide local authorities to setspecific lower limits on mortgage rates to reflect local realestate market conditions, the central bank said.
"We should ensure the effective implementation of regionaldifferential housing credit policy, keep individual mortgagerates basically stable and safeguard the legitimate rights andinterests of both borrowers and lenders," the central bank said.
Mortgage loans signed before Oct. 8 will be implementedaccording to original contracts, it said.
PBOC Vice Governor Liu Guoqiang told reporters on Tuesdaythat policymakers do not want to see further declines inmortgage rates, and will ensure they remain basically stable.
On Tuesday, China's central bank set the one-year LPR at4.25% and five-year rate at 4.85%, as part of interest ratereforms to help reduce corporate borrowing costs in the world'ssecond-largest economy.
The new one-year LPR was down 6 basis points(bps) from 4.31% previously. It was 10 bps lower than theprevious benchmark one-year lending rate.(Reporting by Kevin Yao; editing by Paul Tait and Jason Neely)