Business frugality is funding Australian mortgage lending, a new report has indicated.

According to News Ltd, research compiled by East & Partners has shown Australian businesses are depositing more money than they're borrowing.

The company's report shows the deposit-to-loan ratio of Australian businesses has risen to 1.25 from 1.15 a year ago, and 0.9 prior to the GFC. As tighter capital requirements see banks easing their reliance on offshore wholesale funding, East & Partners principal analyst Paul Dowling has told News Ltd business deposits are increasingly flowing through to mortgage lending.

"The business market is a net depositor. Active reallocation of deposit funding from business customers to mortgage lending is taking place," Dowling said.