Just how much should you prudently borrow even if the banks ignore the RBA cheap money warning?
The latest Reserve Bank of Australia minutes sent home loan lenders a warning shot not to recklessly lower lending standards.
It was deemed as "especially important" lenders behave cautiously while official cash rates are at their historic lows.
It was said against the backdrop of dwelling prices having increased to 7% above recent previous troughs, with clearance rates noticeably higher than a year ago and housing turnover having increased.
“Overall, recent data and information were consistent with further recovery in the established housing market and moderate growth in dwelling investment."
It noted lending rates had declined to historically low levels which were "continuing to provide a substantial degree of policy stimulus to the economy.”
“This was most evident in the housing market, with the lags in the effect of policy meaning that earlier actions were still likely to take some time to have their full effect on demand more generally.”
But it warned banks to remain vigilant in their lending policies.
“Members observed that banks' asset performance and funding structures continued to improve, and their profitability remained strong compared with that seen in most other advanced economies. In the current environment of low interest rates and slow credit growth, members agreed that it was especially important that banks maintained prudent lending standards.”
The minutes noted board members had been briefed on the bank's half-yearly check-up of the financial system which will be published next week.
It acknowledged Australia's banking system was in a "relatively sound position" but noted risks posed by very cheap credit.
I've looked at the Home Loan Advice Centre which has a rough guide for buyers who are looking to purchase a property and would like a guide on how much they can borrow.
For a single applicant with a net annual income of $40,000, the maximum amount you can borrow is about $315,000.
For married or de facto couples with a net annual income of $120,000, the maximum amount you can borrow will be about $1,170,000.
For couples with one dependent, this figure goes down slightly to $1,123,000.
Maximum loan levels will be less than the above figures where two individuals (i.e. two friends) are making a joint application.
Maximums will differ between different lenders.