Banks may or may not be planning to increase home loan rates to cover increased funding costs, but they have already started pulling another lever to increase their margins on retail mortgages. Discounts on standard variable rate mortgage have come down by around 20 basis points since the start of the year.The joint head of lending at Centric Wealth, Sheyne Walsh, said the discounts on offer last year were the biggest he had seen in his career. Lenders offered discounts of as much as 110 basis points as they fought for share in a weak market. These discounts were applied selectively, depending on the size of the loan and the loan-to-valuation ratio.Walsh said: "Going into December we were getting 100 basis points regularly and we got 110 points for one client.""Since Christmas it has come back. Commonwealth Bank has come in about 20 basis points. Its best offer now is 80 points and 70 points is more common. "ANZ has also come in 17 to 20 points. "Most lenders don't publish their discount rates. You call them and see what is available. They might tell you things haven't changed since last year but there has been a change. They are not buying the business the way they were last year."Cutting back on discounts changes the pricing of new business but does not have any impact on the existing loan portfolio. It will have only a limited effect on mortgage margins.Walsh said Citibank was still aggressive with its discounts (and its fixed rates) but it was lending on low LVRs.The head of corporate affairs at Mortgage Choice, Belinda Williamson, said feedback from the group's loan writers was that discounts have been cut back by 10 to 20 basis points this year.Williamson said the handful of lenders that had reduced their discounts included two majors. Discounted standard variable-rate loans are the most popular mortgages in the market.Senior financial analyst at Canstar Mitch Watson said the average discount was 70 basis points and this had been fairly stable for the past few years.Watson said it was the bigger discounts, which are applied selectively, that have come back. According to Canstar's data, there are still a few lenders offering discounts of 90 basis points or more. ANZ is offering a 90-point discount on its Breakfree package and Macquarie Bank is discounting 91 points on its Premium package.Suncorp is taking 103 basis points off the advertised rate for borrowers who take its My Home Package, and Citibank is discounting 107 basis points on its Mortgage Plus package.