Loan brokers have expressed surprise at reports this week that the Australian Prudential Regulation Authority has written to banks cautioning them to make sure that competitive pressure does not lead to any deterioration in loan underwriting standards.APRA has not commented on two reports that appeared in the Australian Financial Review, but it is assumed it is concerned about the heavy discounting of standard variable rates, and about offers to write mortgages with loan-to-valuation ratios above 95 per cent.The joint head of lending at Centric Wealth, Sheyne Walsh, said Commonwealth Bank and St George have led the market with aggressive discounting this year, offering to take up to 100 basis points off their standard variable rates for selected borrowers.Walsh said: "There are very good discounts in the market now, but that doesn't mean standards have deteriorated. Lenders are very selective about who is offered those discounts."The banks are looking for business, but our view is that credit terms are still pretty tight. Arrears rates are going up and the banks want to keep that under control."He said the good deals tended to be offered to borrowers taking out big loans on low LVRs. "It is not a rubber stamp," Walsh said.AFG's general manager sales and operations, Mark Hewitt, said that LVRs were going higher and discounts were getting deeper, but lenders were also discerning. "We don't see any loose lending at all," he said.While the discount war appears to be a battle between the big banks, some second-tier lenders are trying to keep pace.In June, Citibank announced a pricing structure that included an 85 basis point discount off the standard variable rate for borrowers with LVRs under 70 per cent; a 78 point discount for borrowers whose LVRs were between 70 and 80 per cent, and a 48 point discount for borrowers with LVRs of between 80 and 90 per cent.Citibank also announced discount rates of between 97 and 112 basis points for Mortgage Plus customers (Mortgage Plus is a line of credit secured by a mortgage).This week ME Bank cut its standard variable rate from 7.09 to 6.99 per cent.