(Yicai Global) Sept. 28 -- The National Institute for Finance & Development affiliated to the Chinese Academy of Social Sciences and the Center for National Balance Sheets released their second-quarter report on China's deleveraging process yesterday.

Household leverage ratios continued their rise in the second quarter, with some short-term consumer loans actually home loans, cnstock.com quoted the report as saying yesterday.

The leverage ratio jumped by 1.3 percentage points from 46 percent in the first quarter to 47 percent in the second, and was up 2.6 percentage points in the first half. Leverage continued to increase in the household sector among real economic entities, the report noted.

However, it projected that future home transactions are likely to decline as the property market undergoes further corrections and real-estate controls take effect. These will help contain the household leverage ratio, which is poised to slow.

The rapid increase in short-term consumer loans looks alarming. These loans grew USD13,636 billion (CNY9 trillion) in the first six months, with outstanding loans up by 33 percent annually. In comparison, such loans increased only CNY0.8 trillion over all of last year, the report added.

As property controls become increasingly stringent and mortgage loans are restricted, some residents may borrow money under the guise of short-term consumer loans to buy homes, the report stressed, adding that the possibility of illegal capital flows into the property market is accordingly rising.

Since consumer loans and mortgage loans are different in nature, the former have higher interest rates and risks than the latter. Quite a few consumer loans are extended to borrowers in the form of cash loans, while some fintech platforms offer credit loans with no guarantees or collateral, which might lead to higher future default rates. The regulatory authorities should pay sufficient attention to the potential associated risks, the report advised.