A dangerously overcooked housing market and rising interest rates are poised to plunge thousands of Australian families into mortgage stress in coming years, top economists have warned.

As the Turnbull government grapples with how to address the housing affordability crisis in its May budget, some experts are predicting a housing correction that cannot and should not be stopped.

Sydneysiders would likely be hardest hit by rising interest rates and a possible housing correction. Credit:Andrew Darby

Deloitte Access Economics' quarterly business outlook, released today, predicts the official cash rate of 1.5 per cent will climb slowly in 2018 and 2019 to reach 3 per cent in the early 2020s.

The Reserve Bank was well aware "interest rates are now a massively more potent weapon for slowing the Australian economy than they've ever been before", the forecaster said.