Aust banks at risk from house price correction: report

Australian banks are vulnerable to a "looming" house price correction and have the highest exposure to residential mortgages of any financial institutions in the world, The Australian Financial Review reports.

According to the newspaper, Moody's Analytics managing director Tony Hughes says Australian house prices are overvalued.

"Irrespective of the complacency of local analysts, who sound a lot like many US housing cheerleaders circa 2006, this exposure represents a major concentration risk for banks and the Aussie economy," he said.

The high exposure of Australia's banks to home loans was a key concern for international investors, Mr Hughes told the AFR.