Reserve Bank governor Glenn Stevens believes stricter lending rules would have to be imposed if the central bank felt a housing bubble was getting out of hand.
He noted during his twice-year appearance in front of the House of Representatives economics committee that investor loans were growing fast in Sydney as well as Melbourne.
But at this stage, Mr Stevens is content to just warn people that they should not take on more than they can afford.
He said the next step would be to impress through the RBA's supervisory mechanism that banks take greater care who they are lending to and take a close look at standards of lending.
The strongest step would be to introduce a so-called macro prudential tool that would limit lending, and what Mr Stevens described as the "latest fad" internationally.
"I don't rule that out as a possibility," he said.
He also said that at some point interest rates might not be as low as now, which would have a bearing on borrowing.
"(But) that seems unlikely in the near term horizon," he said.
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