The big banks are easing back on their “mortgage wars” and calling time on big incentives for new customers.

But while cash back will no longer be on offer, one major lender, Westpac, is offering another carrot to those refinancing by easing its serviceability buffer to just 1% for borrowers with good credit histories.

Currently, APRA (Australian Prudential Regulation Authority) requires banks to include a 3% buffer when assessing a borrower’s capacity to repay.

The buffer is in place to ensure that borrowers can meet increased payments through rate rises, although APRA has said there can be “exceptional cases where borrowers do not fit the standard approval process”.

It says in these circumstances its standards don’t stop banks from lending to those borrowers.

APRA will continue to closely monitor economic conditions and says: “Should risks to financial stability change, APRA will adjust its macroprudential policy settings accordingly after careful consideration and consultation with other agencies on the Council of Financial Regulators.“