The wattle has flowered, the blowflies are starting to buzz and the early mornings are becoming just a little less frosty — sure signs spring has sprung.

The other sure sign of an Australian spring is the sprouting of "for sale" signs in front yards and the awakening of hordes of hopeful buyers from their winter hibernation, spending sunny Saturdays driving from house to house for inspections.

And, battered by scandals and tighter regulation but not bowed, Australia's banks are aggressively chasing those masses.

"Banks have traditionally put their hottest deals for home loans in springtime, because that's when people are buying new houses," Rate City's money editor Sally Tindall told ABC News.

Like the weather in some parts of the country, the deals this year seem to be unusually hot.

"We've already seen about 400 home loan products being cut in the last four weeks, some up to 0.93 per cent [percentage points], which is a really significant saving," Ms Tindall observed.

"We've also seen banks put forward specials to entice you into their loans."

The non-rate incentives include offers such as 350,000 bonus reward points, rebates above $1,000 and reduced mortgage fees.

However, Ms Tindall said prospective home buyers should be wary of special offers, which could result in paying much higher interest rates over the life of the mortgage.

"The best thing to do is check whether the maths adds up," she cautioned.

"There's no point signing up to a home loan that's 30 years long just for 350,000 rewards points, you need to work out whether it's the best product for you and whether you're going to be financially well-off in that product."

Discounts also going to property investors

The interest rate discounts are a significant departure from the independent rate rises most banks pushed through earlier this year.

Those rate rises were prompted by the bank regulator APRA's moves to limit investor lending growth and the increase in people taking out interest-only loans — those are mortgages where the investor doesn't start paying back any principal straight away, meaning lower repayments for the first few years of the loan, but much higher repayments when the interest-only period ends.

Given the regulator's particular angst over this type of lending, you'd think the current discounts would be targeted at owner-occupiers paying back principal and interest.

But Sally Tindall said that isn't so.

"We're seeing discounts across the whole market, whether that's fixed rates, variable rates, investors or owner-occupiers," she noted.

"Surprisingly, we're seeing a lot of discounts for interest-only loans, which is interesting because that's one of the things APRA has cracked down on.

"Over the last few weeks, we've seen discounts on interest-only from two of the big four banks and other smaller lenders joining the party."

It's likely the banks are prepared to offer these deals because the Sydney and Melbourne property markets continued cooling over winter, meaning many institutions are now comfortably below the regulator's investor and interest-only speed limits.

New mortgage discounts could prompt rate response

However, the discounts on new mortgages offer the worst of both worlds for economic policymakers at the Reserve Bank.

On the one hand, they threaten to restoke property prices during the busiest real estate selling period of the year, further inflating what many analysts believe are bubbles in Sydney and Melbourne.

On the other, the discounts don't go to existing property owners, struggling to meet their mortgage repayments amid the lowest wage growth since the last recession, meaning they are likely to keep their wallets closed, constraining economic growth.

It's possible that the regulator may be compelled to further tighten its lending growth limits if borrowing re-accelerates.

After all, a 10 per cent cap on investor loan growth is pretty generous when wage growth is around 2 per cent and population growth nowhere near enough to make up the difference.

The limit of 30 per cent for interest-only loans still leaves Australia at the higher end internationally of this riskier form of lending, so there is room for a tighter clamp-down.

However, if so-called macroprudential policies — that is tighter regulatory limits on banks — don't do the job, then the Reserve Bank may decide it has to step in with an official rate rise to offset some of the current discounting.

Even a 25-basis-point rate increase would send a pretty clear message to property buyers that the world may be starting to move away from a "lower for longer" period of interest rates to one where loans become gradually more expensive.

Certainly, no-one is expecting that to happen at tomorrow's Reserve Bank meeting — all 33 economists surveyed by financial comparison website Finder expect rates to stay on hold, with most expecting things to stay that way until the second half of next year.

Tighter home loan restrictions have cooled riskier parts of the home loan market. ( Supplied: UBS )

UBS economist George Tharenou believes that the current regulatory limits will continue to slow interest-only (IO) and investor lending, but also thinks the Reserve Bank may step in if they don't.

"We still see housing slowing as banks tighten to get under the 30 per cent IO cap, and policy only fully works with a lag," he wrote in a note.

"But, if housing doesn't slow, further policy tightening, including RBA rate hikes, may come onto the radar, but not until next year."

The latest property price figures from CoreLogic out on Friday still suggested slowing momentum in the booming markets, especially Sydney.

But many economists also see overheated real estate as a current constraint on what may be the RBA's preferred course of action otherwise.

"Inflationary and wage pressures are weak. The RBA would prefer to have a lower dollar, so there is a rationale to cut rates," noted Richard Robinson from BIS Oxford Economics in the Finder survey.

"But RBA fears heating up residential property markets, so it will hold rates."



Property pundit Michael Yardney from Metropole agrees.

"The RBA can't raise rates as it would stifle our fragile economy and would lead to a higher Australian dollar," he told Finder.

"Similarly, it can't lower rates as this would fuel the Sydney and Melbourne property markets.

"So rates are likely to be on hold for a while."

Being held hostage by one group of investors — albeit a very large group — is not a situation that the Reserve Bank would enjoy.