In NSW and Victoria, one in four homebuyers borrowed on low deposit, 29.3 per cent in SA and 21.8 per cent in Tasmania.

Perth’s outer ring suburb Chittering has the highest proportion of highly leveraged households in the country, with nearly three in four taking out low deposit loans in the past year.

In NSW, Hunter Valley suburbs Bellbird and Aberglasslyn were the most exposed with 69 per cent and 51.6 per cent of homebuyers borrowing on low deposit to afford the rapidly rising house prices in the area.

In Victoria, more than two in five homebuyers in Bendigo and Hepburn Springs and more than half in Leopold, are potentially vulnerable to rising interest rate.

More than half of homebuyers in Brisbane suburbs Carseldine and Bald Hills took out high LVR loans while nearly two thirds in Blackstone in the Ipswich area have borrowed large amounts relative to value of the property.

“These are the areas where risks would show up,” said Shane Oliver, AMP Capital chief economist.

“When households are these highly leveraged, it’s usually a sign that the budget is fairly stretched as well.

“Hopefully, the banks have done their serviceability tests appropriately and people haven’t lied in their loans in making their loan applications, but still, high leverage is usually a sign of high risk.”

If interest rates rise higher and there is a hard landing, the highly leveraged suburbs could be more exposed, according to Pete Wargent, co-founder of BuyersBuyers.

“The cash rate target going from 0 to 1 per cent won’t move the needle too much, but if the terminal rate for this cycle proves to be as high as 2.5 per cent, then highly leveraged households would certainly feel the pinch from that,” he said.

People with high LVR mortgages were also more likely to fall into negative equity if the property market fell, as expected, said Sally Tindall, director of research at Rate City.

“Borrowers who can keep up with their mortgage repayments don’t have to worry about selling at a loss, but being in negative equity can lock people in ‘mortgage prison’ until they get a decent amount of equity behind them,” she said.

Homebuyers who have used maximum borrowing capacity may not be able to refinance to a cheaper rate as the new lender will assess their ability to repay the debt on a higher rate than they were originally on said Alan Hemmings, chief executive of HomeLoanexperts.

“If the rising interest rate market causes property prices to drop, this is where highly leveraged households will be impacted,” he said.

“If customers have borrowed 95 per cent of the purchase price and prices drop 10 per cent, then they may have negative equity, which will impact their ability to refinance to a cheaper interest rate.