The Queensland banking and insurance group Suncorp presented its results for the 2007-08 financial year last month. The point of interest for borrowers was that the bank said it expected to have much lower lending volumes in the year ahead.

This is a combination of two factors. Borrowers are tightening their belts, cutting back on spending and reducing their demand for finance. At the same time, banks such as Suncorp face pressure on their balance sheets. They need to raise capital to support their lending and that capital has been hard to find, given the impact of the global credit crunch.

Without fresh capital, a bank's lending activities are constrained.

The other reason banks may be more reluctant to lend is that more borrowers are getting into trouble. Suncorp's $627 million of non-performing loans represents 1.12 per cent of gross loans on the books. That might not sound like a lot but the figure has almost doubled from the 0.7 per cent reported in December. Non-performing loans are at a level last seen in 2001, a year when the Australian economy came close to recession as the dotcom bubble burst.

This increase worries the banks. Chris Skilton, Suncorp's chief financial officer, says the present credit cycle has not yet reached its peak, which means the level of non-performing loans and defaults will go higher.

Banks usually respond to such conditions by tightening their lending criteria. At the same time, many small lenders are getting out of the market.

This year financial institutions that have stopped lending or reduced it include Macquarie Bank, Bluestone Group, Pepper Homeloans and Columbus Capital.

How easy or hard it is to get a home loan will depend on the big banks because they are dominating the market and will continue to do so for the foreseeable future.

Money put some questions to the big banks about the approaches they are taking to the market. We asked them if they had made any changes to lending criteria this year, changes to credit assessment procedures, increases in income servicing requirements, reduction in their maximum loan-to-valuation ratio or change to thresholds where mortgage insurance is required with a loan.

The biggest home lender, the Commonwealth Bank, says: "Over the past 12 months we have sought to make it easier for customers to do business with us by broadening some of our eligibility criteria and verification requirements. However, at the same time we have been increasing our scrutiny of applicants who do not have a strong existing CBA relationship.

"We have revamped the switching process for existing home-loan customers, reduced documentation and realigned staff accountabilities, making it much quicker for the customer's request to be actioned."

Commonwealth says its maximum loan-to-valuation ratio had not changed and the requirement for mortgage insurance remained unchanged - above 80 per cent ratio on standard loans and above 60 per cent ratio on low-doc loans.

ANZ says it has tightened up in one area: it has removed interest-rate discounts on new low-doc loans with high ratios. Otherwise it is business as usual.

National Australia Bank says it has "enhanced" its loan serviceability assessments during the past year "to better ensure that loans are extended only to applicants able to withstand the economic conditions we are facing". It says it has enhanced its "risk discrimination" and made adjustments to the "parameters supporting serviceability calculations" to keep up with economic conditions.

The bank says it reviews its affordability rate regularly to ensure it is in line with economic conditions. Banks assess whether the borrower could continue to meet repayments if rates go up by certain amounts.

NAB has not made any change to its maximum ratio on home loans or criteria for mortgage insurance. It has, however, strengthened compliance with mortgage insurance policy.

Westpac says it has not made any recent changes to its credit scoring or assessment criteria. The bank says it is comfortable with its present position, having tightened up last year in anticipation of an economic downturn.

The bank has not changed its affordability measures, such as interest-rate buffers, its ratio policies are the same and there have been no material changes to other criteria.

The banks insist that they are still in a very competitive market. Their lending decisions are a balance between caution over the deteriorating economic outlook and the need to service existing customers and attract new ones.

Overall, the responses suggest that home loans will be harder to get but the banks are still keen to talk to quality customers.