Constraints: the state's social housing stock is failing to meet the growing need.

"We have assurances from bank boards that they are closely monitoring their lending standards.": Dr Jim Laker, the chairman of the Australian Prudential Regulation Authority. Photo: Louie Douvis

Australian banks should not forget the lessons of the housing market collapses in economies such as Spain, Ireland or the United States, the nation's banking regulator says.

The chairman of the Australian Prudential Regulation Authority, John Laker, last night said the regulator had been engaging "quite assertively" with banks to ensure credit standards did not slip.

A loosening in lending standards in the housing market was the most likely way in which the risks of low global interests could affect Australia, he said.

"The issue for our banks is how they respond to a low interest rate environment, which depending on how long quantitative easing may last, could be in place for some time," Dr Laker said.

"We don't want memories of the earlier correction in housing prices in Australia a decade ago, or the memories of what's happened in housing markets in Spain, Ireland or the US, we don't want those memories to be short, and we don't want those memories to be selective."

The comments come after figures published yesterday showed a lift in low-deposit loans in the September quarter.

Banks wrote $10.8 billion in loans with a loan-to-valuation ratio of 90 per cent or more in the quarter – 14.1 per cent of all housing loan approvals. This was an increase from 13.5 per cent of approvals in the previous quarter,

Dr Laker observed that bank advertising of low-deposit home loans had become more widespread, and competition between lenders was picking up. However, he said APRA worked extensively with bank boards to ensure standards did not slip.

"We are pathologically worried about poor credit standards if they become pervasive," he said.

"We have assurances from bank boards that they are closely monitoring their lending standards."

Chief executive of interest rate comparison service RateCity Alex Parsons said the share of buyers borrowing up to 90 per cent or more of a property's value was now at its highest level since 2009.

"It is creeping back up to levels we haven't seen since the global financial crisis."

Mr Parsons said it was critical people assumed interest rates would rise if they were taking out a new loan.

"If interest rates increase, that's going to have quite a dramatic impact on consumers' ability to repay those mortgages."