The Reserve Bank says potential changes to lending rules to manage increasing risk in the housing market will not be heavy handed.
Financial regulators are discussing a possible tightening of rules for investors seeking funds, amid concerns about an "unbalanced" market.
Investors currently make up 45 per cent of total loan approvals, with these borrowers mainly snapping up existing properties.
That has helped fuel strong growth in capital city house prices, most notably in Sydney.
RBA deputy governor Philip Lowe says a sharp increase in investors buying property had increased overall risk in the property market.
"It is important to make clear that I am not saying that this will end badly, or even that is likely to end badly -- just that, on average, recent loans are probably a bit more risky than those made earlier," he told a business conference in Sydney.
"Given this, it is prudent for both borrowers and lenders to be careful."
But he says heavily-indebted investors need to be mindful of a slowdown in house price growth when interest rates rose again.
"You need to think about the risks involved in this investment strategy," he told a business conference in Sydney.
"In an environment of low interest rates, one needs to ask the question of whether those low interest rates will be there indefinitely."
But any new lending rules to address rising risk levels will not represent "a return to the type of heavy regulation we saw in earlier decades", Dr Lowe said.
Lenders will always find ways of getting money to those that want it, he said.
"All this means that we need to be realistic about what can be achieved through changes in the regulatory parameters alone," Dr Lowe said.
"This realism, however, need not preclude consideration of modest and sensible changes within the existing prudential framework."