The regional lender's shares surged 2.5 per cent on Thursday to $12.04 after reporting cash earnings of $175 million for the first half of the financial year, down 2 per cent from a year earlier.

The bank said it had picked up more home loans in Melbourne and Sydney, where house price rises had surged in recent years, and that was helping drive a recent uptick in loan applications.

Mr Sutton said he would not characterise the entire market as a bubble but certain pockets of the market remained speculative.

"The word bubble is a highly emotive term. I don't think you can characterise the whole of Australia in a housing bubble.

"The speculative end of the housing market is certainly in those small studio apartments that have had significant foreign buyers.

"I would certainly say there is price strength in key markets in Melbourne and Sydney, and they have risen very, very quickly, and that does give concern."

Mr Sutton said he also shared the Treasurer's concerns about rising household debt levels.

"Household debt to GDP has risen significantly, I'm sure that both the government and Treasurer look at that number," he said.

"When we are assessing the ability of customers [to service loans] we validate 100 per cent of our mortgages and do look at living expenses."

Bank of Queensland has around half of its loan portfolio outside of Queensland.

On Thursday the bank blamed strong competition for loans and deposits and a low interest rate environment for a reduction in earnings for the six months to February 28.

Mr Sutton said while earnings were down, the outlook for the second half was more positive, with lending application volumes surging 30 per cent in recent weeks, compared with last year.

"We are operating in a rapidly changing operating environment where regulation, competitive dynamics and customer demands are shifting," Mr Sutton said.

"A number of the headwinds that emerged in 2016 abated late in the half, which saw mortgage application momentum return and deposit spreads improve.

"It's expected that this will contribute to better revenue momentum in the second half."

The major banks have moved to lift interest rates on investor loans and interest-only loans, with a series of announcements late last week.

It followed a speech by Treasurer Scott Morrison urging financial regulators to crack down harder on loans to real estate investors amid revelations that foreign buyers are spending $8 billion a year on new homes in NSW and Victoria, locking out owner-occupiers.

Commonwealth Bank raised its standard variable rate for investors by a 24 basis points to 5.8 per cent, while raising its rate for owner-occupiers just 3 basis points.

Westpac and ANZ lifted their rates on interest-only loans, saying the changes reflected higher lending costs and a "range of regulatory and risk factors".

Mr Sutton said while the bank continued to face challenges in the form of low credit growth, low interest rates, regulatory uncertainty, changing consumer expectations and "increased scrutiny of conduct and culture", the bank was at a "turning point".

"Our focus will remain on BOQ's growth prospects in niche customer segments and asset quality which we believe will drive more sustainable profits longer term," he said.

Mr Sutton said although there were pockets of weakness across the economy, there were no signs of deterioration in the bank's loan portfolio.

Loan impairment expenses were down 25 per cent compared with the same half last year, to $27 million.