The new discounts cut lender honeymoon headline rates for two-year variable products for investors and homebuyers below the benchmark 4 per cent, despite increased funding pressure.

The latest round of cuts by the nation's first, second and fifth largest lenders will also increase pressure on other banks to follow suit.

CBA has announced cuts of up to 30 basis points on its two-year variable rate introductory products covering principal and interest for owner occupiers and investors and interest-only borrowers.

The bank is not imposing monthly loan service fees and establishment fees. For example, its principal and interest, owner-occupier two-year introductory rate has been cut by 20 basis points to a headline rate of 3.69 per cent.

Suncorp is increasing the discount on its one- and two-year fixed rates by 55 basis points to a headline rate of 3.99 per cent.

Westpac is offering cuts of up to 50 basis points and free international trips. The bank and subsidiaries, Bank of Melbourne, St George Bank and Bank SA, are also targeting borrowers' growing fears about "security and stability" in turbulent real estate and capital markets.

For example, five-year principal and interest repayments borrowers are being offered a 40-basis-point discount of the headline rate of 4.09 per cent. There is a $395 annual fee.

Borrowers are also eligible for enhanced Velocity frequent-flyer points with a $250,000 loan earning a couple 200,000 points, enough for a return flight to Hong Kong, and a $1 million loan qualifying a couple to fly economy return to London from any Australian capital.


Growing pressure

At the same time as the banks are sweetening their introductory rates, they are also targeting quality borrowers via tighter criteria, in response to pressure from regulators to prevent reckless borrowing.

For example, CBA is double-checking borrowers' capacity to service their loans by scrutinising incomes and forensic analysis of household spending across 11 categories covering everything from pets to gym fees.

Westpac earlier introduced 13 categories. It also appointed Equifax, Experian and illion, to help screen applications in response to government and regulatory pressure to boost loan scrutiny.

ING, Macquarie Bank and listed-lender Homeloans recently increased mortgage rates and/or fees in response to rising funding costs.

The moves come as many lenders struggle with growing pressure to raise rates because of rising funding costs caused by increased global demand for capital and overseas central banks raising cash rates.

Big four banks, which continue to face damaging revelations from the banking royal commission, are under additional public pressure to maintain existing rates until the Reserve Bank of Australia raises cash rates.

Short-term discounts are attractive to borrowers and give lenders increased flexibility to extend – or discontinue – depending on funding pressures.

ING, Macquarie Bank and listed-lender Homeloans recently increased mortgage rates and/or fees in response to rising funding costs, falling demand and the need to protect net interest margins.

Other smaller mortgage-centric lenders are also raising rates by up to 10 basis points despite short-term pressure on their margins slightly easing as the three-month bank bill swap rate declines.The BBSW is a short-term money market benchmark interest rate.