Home buyers who stretched themselves to enter the property market while interest rates were at record lows could be "vulnerable" to economic shocks, a senior Reserve Bank official says.

With markets and key forecasters expecting official interest rates will start to rise next year, RBA assistant governor for the financial system Michele Bullock also said the central bank would need to keep a close eye on how rate rises affected households' spending.

Ms Bullock on Tuesday said a key risk that was being watched closely remained the high level of household indebtedness, which was a result of cheap credit and rising house prices.

Even though these borrowers were currently managing their debts well, and bank lending standards had improved , she said that "with my worry hat on, high levels of debt do leave households vulnerable to shocks."