SURGING property prices appear to be driving a spending spree in Australia, with home owners taking out bigger mortgages to help fund the purchase of big-ticket items, from new cars to holidays.

While many struggle to get a foothold in the housing market, home owners buoyed by double-digit rises in property prices are increasingly using their homes as ATMs.

It has rekindled memories of the early 1990s when banks encouraged home owners to borrow for a holiday or new car and add it to their mortgage.

But regulators and economists fear that the borrowing binge could leave home owners vulnerable to rising interest rates, while any sudden reversal of housing prices might tip many into negative equity - when the size of the loan exceeds the value of the property.

Before this week's 25-basis point rise in interest rates, Reserve Bank governor Glenn Stevens took the unusual step of appearing on breakfast television to say that property prices were ''getting quite high'' and warn of the dangers of people taking on too much mortgage debt.