The August rate hike spooked investors and homebuyers away from the property market, possibly denting the nascent recovery in the sector.
Loan cancellations soared by 13.6% in the same month, following the 25 basis point rate hike by the Reserve Bank of Australia, according to a CommSec report.
The Australian Bureau of Statistics also showed that the value of new home loan commitments fell by 0.3% to 22.19 billion in the same month, while investment loans plunged by 4.5% as investors moved their money away from property.
The value of home loans that were advanced but not taken up jumped by 28.6% in August compared to a year ago, while potential homebuyers cancelled $2.03bn worth of previously committed loans in August - a 21% rise from last year.
Martin Arnold, equities economist with CommSec, wrote that investors have steered away from property, and better returns available in other areas have resulted in record-topping loan cancellations in August.
"The renewed hesitance of property investors will be felt for many months to come. Anyone who had been planning on purchasing a home or an investment property would want a greater amount of certainty as to the likely level of interest rates before handing over their hard-earned cash," he said.
The good news is that owner-occupier loan approvals rose in August. Arnold noted that owner-occupiers have been the only source of growth in property amidst the strong job market.
It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan