The banking watchdog says limits placed on mortgage lending to cool the housing price boom won't be loosened until it's "comfortable".
Australian Prudential Regulation Authority chairman Wayne Byres said if the market gets to a point where it can make better-informed decisions, some constraints may no longer be necessary.
"But I can't quite put a date when we get to the point where we're comfortable," he told a Senate committee hearing on Thursday.
All the measures undertaken by APRA, such as setting benchmarks on investor lending and interest-only loans, as well as measuring the capacity of a borrower to repay a loan, were designed to reinforce lending standards and keep them at a sensible level.
"There are a range of things that suggest the quality of lending and judgements banks are making are producing better quality lending," Mr Byres said.
It was clear the measures have had an impact on investor loans and there has been a significant reduction in interest only loans.
"We have never set out, as I have said on many occasions, to decide what house prices should be," he said.
It was still an environment where house prices were very high, pushing people into higher debt.
But while household wealth had been growing strongly, household income growth was relatively subdued, Ms Byres said.
"The idea people will pay their debts off in the future because their income will grow strongly is an assumption you can't necessarily make," he said.
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