CANBERRA, AAP – Reserve Bank governor Philip Lowe has assured home buyers he is not about to jack up interest rates to cool a heated housing market.

House prices have surged 13.5 per cent in the past year, the strongest gain since 2004, which has resulted in record levels of borrowing at ultra-low interest rates.

But Dr Lowe said there was a common misconception the central bank would step in to choke off house price rises by raising interest rates.

“It would be the wrong thing to do, and I don’t think it would work,” he told economists on Thursday.

“If borrowing is unsustainable then we will be talking with APRA about prudential tools, but we are not going to use monetary policy to deal with rising housing prices.”

The RBA and the Australian Prudential Regulation Authority are carefully monitoring developments in the housing market to make sure lending standards do not deteriorate.

They have previously put curbs on borrowing requirements when conditions have got out of hand.

The RBA board left the cash rate at a record low 0.1 per cent at this week’s meeting, and at this stage the governor does not expect a hike until 2024.

The bank wants to see inflation sustainably between the two to three per cent target before lifting the cash rate, which will require wage growth of above three per cent and an unemployment rate close to four per cent.

Annual inflation is running at 1.1 per cent, wage growth stands at 1.5 per cent and the jobless rate is at 5.1 per cent.

But Dr Lowe emphasised an increase in the cash rate depended upon the data, not the date.

“It is based on inflation outcomes, not the calendar,” he said.

National Australia Bank economist Tapas Strickland said the governor’s comments should quash suggestions the RBA could lift rates as early as 2022, which is being speculated in financial markets.

He said while NAB saw the risk of a hike in late 2023, its central view remained the first rise would be in 2024.