However, experts say regional values may prove more resilient against the rising cost of borrowing.

The prediction of a 15 per cent decline was contained within the Reserve Bank's Financial Stability Report, which assesses risks to Australia's financial system.

It warned that if interest rates rise by two per cent prices could decline as much as 15 per cent in a two-year period.

While the majority of mortgage holders would be able to cope with higher interest rates, due in large part to increased savings rates during the pandemic, some households would be in for a shock when their fixed-rate mortgage term ended, the report warned.

CoreLogic head of research Eliza Owen said that a two per cent rise was consistent with the expectations of many economists.

"Based on market pricing and the level at which we are seeing inflation and unemployment, there is a growing expectation that the rate tightening cycle could see a peak in of around two per cent in late 2022/2023," she said.

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While large upswings in value, like those witnessed in regional markets during the past two years, were sometimes met with a "proportionate decline" when house prices dropped, population changes could lend regional markets a hand when rates rise.

"It's hard to say [what impact rising rates will have], because on the one hand, internal migration trends have been quite favourable for regional Australia, and COVID may have been the big structural and societal change that is needed to see that sustained value across regional Australian dwelling markets," Ms Owen said.

"I happen to think some of the changes we've seen in regional Australia are pretty sustainable, and so too will be the resilience of popular regional centres.

"This would be further cemented by some of the big infrastructure investments laid out in the recent federal budget. From both sides of politics, the past two years have I think cast much more interest and visibility on developing the regions," she added.

PRD chief economist Dr Diaswati Mardiasmo said that while successive rate rises like those outlined in the RBA's report weren't without precedent, the post-pandemic recovery may dictate a more cautious response.

Regardless of what the RBA did, many banks had already moved to increase their mortgage interest rates, she added.

"So in a sense, people are already dealing with a change in the mortgage lending space, and potentially in their mortgage home loan repayments as well," Dr Mardiasmo said.

Although regional markets varied considerably, Dr Mardiasmo said that a general lack of existing supply, combined with regional home lending programs from both the Coalition and Labor, could sustain regional prices regardless of a rate rise.

"There is less ready-to-sell stand-alone homes being constructed or planned for construction ... Because of this, and again there are markets within markets, regional areas have the potential to withstand cash rate increases more so that capital cities," she said.

Less reliance on international migration; higher affordability and rental returns; and a 10-year growth rate that was between 10 and 15 per cent lower than the capitals all suggested that regional markets had less far to fall during a future downswing.

"History also shows us that in past historical rate increases, for example between 2009-2011, capital cities dipped deeper, whereas regional markets either stabilised, stagnated or slightly dipped," she said.