Four charts that show Australia's mortgage risk

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The Australian banking regulator has released the quarterly property exposure statistics of lenders.

The data reveals that while banks under regulatory pressure have clawed back some of the excesses, risks are still very real in the housing market.

The Reserve Bank of Australia has signaled concerns amid “heightened risks” from mounting household debt and escalating property prices in Sydney and Melbourne. In its semiannual Financial Stability Review last month, the RBA said about one-third of mortgage holders have either no buffer or can make less than one month’s repayments.

The banking regulator clamped down on speculative mortgages and told banks to limit the amount of interest-only mortgages.

The following four charts compiled from the Australian Prudential Regulation Authority (APRA) data put in perspective some of the worries of the banking watchdog and central bank.

High share of interest-only mortgages: Interest-only home loan approvals made up 36% of total approvals in the March quarter and such loans accounted for almost 40% of the $1.5 trillion in home loans doled out by the banks. That is high by international standards and well above the 30% cap mandated by APRA March 31.

Investor loans refuse to budge down: Despite guidelines in place since the end of 2014 to restrict the growth of mortgages to landlords, the segment continues to account for 36% of all home loans. While that is down from the peak in 2014, it is well above historical averages and the share of new approvals remains at more than a third of total.

High Loan-to-value ratios: This is one area where the banks have reduced the risk significantly over the past 9 years. However the LVR’s of over 80% still remain at more than a fifth of total approvals. However in absolute numbers it remains little changed with approvals clocking $20 billion a month.

* LVR stands for Loan to Value Ratio and is the proportion of money one borrows for a home loan compared to the value of the property.

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