Despite ultra-low lending rates, 20 per cent of Australians are estimated as under mortgage stress.
The amount of outstanding mortgages in Australia grew by the fastest monthly pace in four years.
But economists doubt financial regulators will be too concerned at this stage with investor loans still relatively subdued.
New figures from the Reserve Bank of Australia showed housing credit grew by 0.6 per cent in May, the largest rise since June 2017.
Annual growth now stands at 4.8 per cent, its highest since 2018.
Owner-occupier loans rose 0.7 per cent in the month to 6.6 per cent, also the highest year rate since 2018.
However, growth in loans to housing investors remained relatively modest, rising 0.4 per cent in May to 1.6 per cent.
National Australia Bank economist Taylor Nugent said while investor credit growth has recently picked up, it is unlikely to overly concern regulators.
“Credit growth is being watched closely in regards to assessing the likelihood of a tightening in macro-prudential policies given the surge in house prices,” Mr Taylor said.
“There is little in today’s data to change the sanguine view of regulators.”
Earlier this month, a meeting of the Council of Financial Regulators agreed that overall lending standards in Australia remain sound.
The council is made up of the RBA, Treasury, Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.
However, the banking watchdog, APRA, has written to the nation’s largest banks, warning there are signs of some increased risk-taking as home buyers rush to secure loans in a heated housing market…
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