Demand for home loans dived in January as the effect of three consecutive interest rates took its toll on Australians borrowers.
According to data from Loan Market Group, home loan approvals dropped by 40 per cent from its peak in 2009 – the brokerage’s quietest month since January 2006.
"The three successive rate rises in the final three months of 2009 definitely had an impact on homebuyers so we were glad to see the RBA did not put rates up this month," the group's chief operating officer Dean Rushton said in statement.
Last week, the Reserve Bank kept the cash rate at 3.75 per cent, when most economists had expected a further 25 basis point increase.
Mr Rushton said that while there is still a possibility of rates increasing in March, he didn't see the need for a big rise in the cash rate over the course of the year, as it could undermine confidence in the Australian economy.
According to Mr Rushton, the wind back in first home buyer stimulus has also had a stalling affect on homebuyers.
The government's increased first homebuyers' grant ended on 31 December, returning to $7,000.