Illustration image. [Photo: baidu]

The municipal government of Shanghai is raising the limit of the amount of money people can borrow from the city's public housing fund.

Starting on Wednesday, first-time home buyers will be able to borrow up to a million yuan.

The current ceiling is 600-thousand yuan.

The Public Housing Fund is a compulsory savings account to which Chinese workers and their employers have to contribute.

The fund offers a mortgage rate below that of commercial banks.

Market analysis suggests the average cost of a new home in Shanghai came in at 3.2 million yuan last year.

The move follows a decision by the central government to allow first-time home buyers who use the Housing Fund to only put down 20-percent as a down payment.

This is down from 30-percent.

The minimum down payment for second-home buyers has also been reduced to 40-percent from the previous 60 to 70 percent threshold.