One of Australia's most senior bankers, Westpac's Brian Hartzer, has denied that lenders are lowering credit standards in the rush to sign up new customers.
But with competition heating up in the $1.2 trillion mortgage market, Mr Hartzer, pictured, concedes that banks must be "alert to the possibility of things getting ahead of themselves".
In an address on Australia's economic future, Mr Hartzer argued for increased skilled immigration and backed the greater use of government debt to invest in infrastructure.
Banks' lending practices have come under growing scrutiny in recent weeks, amid signs the big four are writing more home loans that require smaller deposits, and after National Australia Bank accused its rivals of lowering standards.
Mr Hartzer, who runs the division that hold's Westpac's flagship retail banking arm and St George, and is viewed as a potential successor to chief executive Gail Kelly, said on Tuesday there had been no easing of credit standards at the bank.
"We certainly don't see any loosening in credit standards, but I think it's certainly prudent that everybody remains alert to that," he said at a business lunch.
"When we look at households' capacity to cover their borrowing requirements, we still think it's pretty good. Nevertheless we think it's prudent to continue to be cautious. We do need to be alert to the possibility of things getting ahead of themselves," he said.
Figures from consultancy Digital Finance Analytics showed this week the average loan-to-valuation ratio (LVR) for new mortgages written by the big banks had risen in the past year, owing to increased borrowing by investors and first home buyers. Westpac's average LVR has also risen, from 69 per cent a year ago to 72 per cent.
In September, the Australian Prudential Regulation Authority said there had been an increase in the most risky loans, with LVRs above 90 per cent.
However, Mr Hartzer said there was "not a lot of evidence" that things were overheating.
He said delinquency rates were falling and credit growth was slow by historical standards.
Amid the focus on Sydney's real estate market, he said housing remained patchy in other parts of the country.
Westpac has been expanding its home loan book at a slower pace than rivals over the past year, but said earlier this month it wanted to pick up market share next year as credit growth rebounded.