Credit deflation forewarns of housing deflation, page-25

High LVR's are definitely not ideal, cannot argue with that. However unless that is couples with mass unemployment I don't see it causing too many issues.

I think the increase in interest only loans however is party due to the increased popularity of off set accounts. I run an interest only loan but pay way more than principal and interest into the offset every month. This way I have access to funds for other purposes. For example, investing to get a better return than current mortgage rates.

I am sure some may use interest only loans in an irresponsible manner but I do not think that is the majority. All IMO.