A growing number of homebuyers across China have threatened to stop making mortgage payments for stalled or unfinished property projects, aggravating a real estate crisis that has already hit the economy.

Two suppliers confirmed to Reuters an online letter written by Evergrande's small suppliers in central China's Hubei province, dated July 15, in which they said they have to stop loan repayments because the developer owed them money, leading to debt problems of their own.

In the letter addressed to Hubei local authorities and banks, the suppliers said 6 billion yuan ($889 million) of funds in an escrow account had been misused by Evergrande, resulting in stalled projects and missed payments to them. They were being used as "financing tools" of the developers, they added.

Evergrande declined to comment.

The loan boycott was first reported by Caixin.

One of the suppliers who is based in Jiangxi, which neighbours Hubei, told Reuters she is waiting for larger companies in her province to take the lead on such action.

The value of the bank loans in question was not immediately clear, nor whether some are already delinquent.

A widening of a supplier loan boycott could add to pressure on lenders' loan books and the country's social stability, as protests by homebuyers have already reached an unprecedented scale.

More than 200 projects by at least 80 property developers across China have been affected by the mortgage boycott, E-house China Research and Development Institution said in a report this week.

The mortgage crisis would not only threaten to kill a nascent recovery in China's capital-starved property sector but also hit banks with hefty writedowns, analysts warned.

($1 = 6.7507 Chinese yuan renminbi)

(Reporting by Xie Yu, Writing by Clare Jim; Editing by Kirsten Donovan)