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.
Research issued before Wednesday's data by Moody's Analytics, which operates independently from the Moody's Investors Service credit rating agency, suggested APRA is on the verge of intervening in the housing market to cool the spectacular momentum experienced across capital cities.
APRA has previously intervened to curb investor demand for housing.
"Macroprudential tools are particularly useful with sustained low interest rates, because they can target pockets of concern," Moody's Analytics senior economist Katrina Ell says.
She estimates that 20 per cent of Australia's population is under "mortgage stress", a concern when lending rates are at historical lows.
Mortgage stress is defined as paying 30 per cent of household income in mortgage payments.
"An underlying concern is that when interest rates do eventually rise, highly leveraged households need to be able to continue servicing their loans, even if rate increases are forecast to be gradual," she says.
The RBA has repeatedly said that interest rates will not rise until inflation is sustainably within the two to three per cent inflation target, an event it does not expect to occur until 2024 at the earliest.
However, there is growing speculation among economists that this could be brought forward to 2023 or even earlier, given the strength of the labour market that has seen the jobless rate rapidly drop to 5.1 per cent.
Financial comparison webside Canstar noted NAB has increased its two-, three- and four-year fixed rates by up to 0.1 per cent for owner occupiers.
"NAB's increase ... is further confirmation that markets are expecting rates to move inside the Reserve Bank's three-year timeframe," Canstar's Steve Mickenbecker said.
Fixed-rate loans are priced against the bond market rates rather than the RBA's cash rate that influences variable home loan rates.
Australian Associated Press