Analysts at Deutsche Bank have identified a major flaw in the prudential regulator’s mortgage data, which they believe severely understates the average balance size of an Australian mortgage because it fails to adjust for "split loans".

This, they argue, may have resulted in the $276,000 figure for the average mortgage balance being understated by up to 40 per cent, potentially giving regulators, economists and the broader analyst community a false sense of comfort about the indebtedness of Australian households.