The big banks are bracing for a regulatory slap-down from APRA, and are pushing out property loans while they can.

Many analysts expect APRA will soon move to curb loans and prevent a property bubble forming in Sydney and other key housing markets.

Fearing heavier regulation is on the way, the big four banks expanded loans for property investments by 10.4 per cent in the year to March 31.

The growth has reached its highest rate since 2008, and has now breached the 10 per cent threshold laid out by APRA last December.

As a result, market investors are holding off bank stocks, leading shares to fall between 4 and 5 per cent in recent days, wiping a total of $20 billion of their value this week.

Insiders expect APRA will move to enact proposals in David Murray's financial system inquiry, to make banks hold “unquestionably strong” amounts of capital, enough to place them in the top quartile of global banks.

APRA chairman Wayne Byres told an Australian Financial Review Banking and Wealth Summit this week that he would act “sooner rather than later” to implement the call for the big four banks and Macquarie to hold extra capital against mortgages.

Vince Pezzullo, a portfolio manager at Perpetual funds management, told Fairfax Media reporters that the main impact of the capital changes would a dilution of banks' returns from mortgages.

He says this would help regional banks compete with the big lenders in the $1.3 trillion home loan mortgage market.

“The level of competition would change,” Mr Pezzullo said.

“Regionals will have an ability to compete on mortgages, the banks' most profitable product, for the first time since pre-GFC.”

There is some speculation that banks will ask investors for more capital.

Reports say that capital will be a central focus of investors when Westpac, NAB and ANZ report half-year profits next week.