Moody's Investors Service has downgraded 12 Australian banks, including the four biggest lenders, reflecting what it called elevated risks in the household sector. 

Such risk was heightening the sensitivity of the banks' credit profiles to an adverse shock, according to the ratings agency. 

"While Moody's does not anticipate a sharp housing downturn as a core scenario, the tail risk represented by increased household sector indebtedness becomes a material consideration in the context of the very high ratings assigned to Australian banks," it said. 

Moody's said the long-term credit ratings for Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp were downgraded to Aa3 from Aa2. 

It reaffirmed their short-term ratings. 

The Australian government has taken steps in recent months to cool the red-hot property market amid concerns that speculation in housing could ultimately hurt consumers, banks and the economy. 

House prices in Sydney and Melbourne have more than doubled since 2009. 

With cash interest rates at a record low and house prices near record highs, the nation's household debt-to-income ratio has climbed to an all-time peak of 189%, according to the Reserve Bank of Australia (RBA).

That means there are an increasing number of people who have little cash for discretionary spending - on everything from cars to electrical appliances and new clothes - as their pay packets get consumed by large mortgages and high rental payments. 

"The resilience of household balance sheets and consequently bank portfolios to a serious economic downturn has not been tested at these levels of private sector indebtedness," Moody's said.