As debate continues on whether the country has a housing bubble, fresh data suggests Australians are borrowing heavily to keep pace with the rapid growth in house prices.

The Melbourne Institute Household Saving and Investment Report revealed the lowest proportion of debt-free households since the series began in March 2001. Only 36.2 per cent of households held no debt in the September quarter, the lowest in nine years.

The survey also found the share of respondents that fully own their home had reached a five-year low of 37.5 per cent.

Edda Claus, Research Fellow at the Melbourne Institute, said the households' financial position, which had worsened in the quarter, is worrying. ''The big danger would be if people lost their jobs. If they're very highly indebted then things can go very bad very fast,'' she said.

Although a dramatic slump in employment seems unlikely, separate data from the Reserve Bank of Australia indicate the ratio of household debt to disposable income hit 159 percent in the three months to June. The highest on record, the ratio was largely attributed to the increase in mortgage debt.

Financial markets are already pricing in about a 60 per cent chance of a 25-basis-points hike in the official cash when the RBA board meets on October 5. With economists forecasting about 1.25 percentage points in interest rate increases by the end of 2011, the most highly geared households could be vulnerable to a sharp increase in their repayments.