Homebuyers throughout Australia are risking heavy financial losses by over-borrowing to join the mad rush into real estate, financial analysts warn. New figures from the Australian Prudential Regulation Authority (APRA) show that Aussies took on an additional $110bn of mortgages in 2016.

The warning carries particular weight because the United States is likely to lift interest rates this week, which some economists say may result in Australia’s big banks increasing their rates even if the Reserve Bank keeps its official cash rate on hold.

Roger Mendelson, chief executive officer of Prushka Fast Debt Recovery, said many homeowners, especially in the booming markets of Sydney and Melbourne, would face dire circumstances once rates eventually start rising. “They are not factoring in the fact that they are buying in a very hot market and what would happen if house prices decline,’’ he said.

Data from APRA indicates that Australia’s housing debt is fast approaching $1.5trn. More worryingly, 22% of new home loans have less than a 20% deposit, including 8% of loans with less than a 10% deposit.

Deposits below 20% usually trigger lenders’ mortgage insurance (LMI), which can be an expensive added cost.

Rex Whitford, principal of Wealth for Life Financial Planning, said Australians have created a “perfect storm” for people to default on unsustainable mortgage payments. Record-low interest rates and skyrocketing house prices have combined to dramatically increase the risks, he said.

“It’s not going to take too much to reverse this good luck — the government had to fill an economic growth void associated with the end of the mining boom, so they have been happy to let this run,” Whitford said. “It’s only because of the low interest rates that people get access to loans. In any other environment these house prices would be unaffordable. As soon as interest rates go up, people will start defaulting.”