However, the Council of Financial Regulators believes overall lending standards in Australia remain sound.

The council - made up of the Reserve Bank of Australia, Treasury, the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission - held its quarterly meeting on June 11.

RBA governor Philip Lowe reiterated to an audience in Toowoomba on Thursday it is important that lending standards remain sound in an environment of low interest rates and rising housing prices.

"The RBA does not, and should not, target housing prices," Dr Lowe said.

House prices have risen by about 10 per cent in the past year, with gains across all states, while demand for home loans has reached record highs.

"APRA has written to the largest Authorised Deposit-taking Institutions (ADIs) to seek assurances they are proactively managing risks within their housing loan portfolios, and will maintain a strong focus on lending standards and lenders' risk appetites," the council said in a statement.

Regulators have previously tightened lending requirements for investors when there have been signs of instability in the lending market from increased risk-taking.

"Over the past few years owner-occupiers have accounted for most of the increase in household borrowing," the council said.

"The demand for credit by investors has been subdued, but is now increasing."

At the meeting the council also discussed the risks that could arise if growth in household borrowing substantially outpaced growth in household income.

"This is not the case at the moment, but the council did discuss possible policy responses to a scenario in which rapid growth in household debt posed heightened risks to the future stability of the economy," Dr Lowe said.

The regulators also discussed financial risks from climate change and two initiatives to help increase the preparedness of financial institutions to manage these risks.

APRA has already released a draft prudential practice guide on climate change financial risks, which will apply to banks, insurers and superannuation funds, setting out how it expects institutions to evaluate and mitigate financial risks related to climate change.

The council is also collaborating on APRA's climate change financial risk vulnerability assessment of Australia's five largest banks.

"This will model institutions' exposures to physical and transition climate change risks," the council said.

"APRA intends to publish aggregate findings by around the end of the year."

Council members discussed how the attitudes of investors to climate change risks were changing and the importance of appropriate disclosures.

Australian Associated Press