During a parliamentary inquiry into housing affordability on Monday, the Reserve Bank of Australia flagged low-income Australians would be pushed into poverty if purchasing a property becomes unattainable.

The comments made by RBA assistant governor Luci Ellis come in the backdrop of soaring land and property values, which have increased upfront deposit costs in obtaining a mortgage.

"If you own your own home at the point you retire that's basically the thing you need to do to not be in poverty in retirement," Dr Ellis said.

The RBA and the Australian Prudential Regulation Authority both stated loan serviceability remained stable, but the deposit requirements were becoming a challenge for buyers.

Dr Ellis noted people whose parents did not own a home would face harsher hurdles in obtaining property, while prices particularly in major cities kept rising.

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"People whose parents rented are going to be in a much more difficult situation to actually get into housing themselves," she said.

"I think that is a legitimate concern."

Dr Ellis warned booming house prices pushing people out of the market is a "legitimate concern" and an urgent policy consideration for law makers.

Liberal MP and chair of the committee, Jason Falinski claimed policy settings to obtain housing should be more equitable.

"We should make sure that any Australians regardless of where they are born and who they are born to, has ... equal opportunity to own the home in which they live," he said.

The RBA's comments on affordability also coincided with admissions its two decades of dropping to the cash rate to prevent higher inflation was a factor in rising house prices.

This is in part to lower nominal interest rates pushing up borrowing capacity which has allowed people to take out bigger mortgages and buy more land.

"We recognise that it is a natural consequence of moving from a high inflation, high nominal interest rate world to a low interest rate, low nominal inflation world," Dr Ellis said.

"The alternative was being a high inflation country, much higher inflation than our peers and that would have difficulties in attracting capital. It would involve economic instability."

Geographical limits and access to more desirable land closer to cities is also factor to rising prices, the RBA said.

APRA executive Renée Roberts said lending standards across the financial sector remains robust, but upfront costs were a hurdle for home buyers.

"Serviceability is not the constraint but the size of the deposit generally is. So we do see first home buyers borrowing at higher LVR's (loan-to-value ratio)," she said.

Australian Bureau of Statistics during its evidence said the number of owners with a mortgage outweighs the number of people who own a property outright.

The ABS said rising construction costs were also a factor in the increased values of dwellings.

Dr Ellis from the RBA also flagged the ability borrow more meant people were prepared to spend more to purchase a property.

The RBA in its evidence said current mortgage holders were paying ahead of repayment schedules, which would mean borrowers could absorb additional costs if house prices took a decline.

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