The corporate regulator will ask the government to change mortgage rules that could make it harder and more expensive for borrowers to get a new home loan if it loses a landmark case against Westpac over responsible lending laws.

Sources close to the Australian Securities and Investments Commission have confirmed the regulator would seek to enforce stricter rules on how banks assess the personal expenses of potential customers if its Federal Court action against Westpac fails.

The big banks largely escaped any changes to home loans, one of their biggest profit drivers, in the final report of the royal commission, allaying fears that a crackdown by Commissioner Kenneth Hayne could lead to a squeeze on bank borrowing to customers that would hurt the economy.

That could change depending on the outcome of ASIC's legal battle with Westpac, with the regulator alleging the bank did not properly consider the spending habits of thousands of borrowers before approving their home loans.