Real estate continues to dominate the headlines in tandem with speculation on the future of the housing market as the banking regulator's crack down on interest-only loans begins to bite.

Bank of Queensland chief executive John Sutton was front-page news last week when he revealed that some of his competitors were offering maximum loans of up to 30 per cent more than his bank was prepared to write. He finished with a timely warning: "This will end in tears."

To test the veracity of that statement I spoke to a friend who works for one of the major banks. I asked him to run the numbers to let me know how much his bank would lend to a couple earning $85,000 a year each, with an adequate deposit and no debts. I was astounded to learn they could qualify for a loan of $1 million.

Let's do the calculations with the figures rounded for ease of reading. Income tax including Medicare Levy on an $85,000 a year salary would be $21,000. Therefore, our hypothetical couple should be receiving combined take-home pay of $128,000 a year.