The expense of a new mortgage is deterring people from taking the plunge into home ownership with the number of loans taken out in March the lowest since August 2005.
The number of owner-occupier loans secured in March fell by a seasonally-adjusted 6.1 per cent compared to February to 59,371, Australian Bureau of Statistics data shows.
This follows a revised 6.8 per cent drop in February.
Economists had expected a 1.0 per cent decline in March.
The total value of housing finance fell by a seasonally-adjusted 5.3 per cent in March to $20.202 billion.
Present mortgage rates are around 9.5 per cent, the highest in 12 years.
The Reserve Bank of Australia, in its quarterly monetary policy statement, said the current level of official interest rates was appropriate to curb inflation.
But it also indicated that it will have little tolerance to second-round effects from high inflation, such as excessive wage demands.
Official wages data will be released on Wednesday and Thursday of this week.