Home loan approvals fell more sharply than economists predicted in May, despite a cut to the official interest rate during the month.
The number of approvals fell 6.1 per cent, outstripping economists' expectations of a 3 per cent drop, as record-low interest rates failed to stoke loan take-up.
There were 50,366 approvals in May, compared to 53,951 approvals in April, according to seasonally-adjusted figures released by the Australian Bureau of Statistics on Friday.
The value of total housing finance shrank 4.4 per cent in the month to $31.14 billion.
The Reserve Bank board cut the official cash rate at its May board meeting to a record low 2 per cent, trimming rates for the second time this year as it attempts to stimulate the economy.
But the low interest rate environment has raised numerous concerns about a speculative property bubble in Australia's capital cities, with strong house price growth recorded, particularly in Sydney.
The total value of loans approved for property investors also declined in May, falling 3.2 per cent to $13.04bn.
A number of Australia’s largest banks tightened loans to investors during the month, after the Australian Prudential Regulation Authority warned it would crack down on aggressive lending.
The number of first home buyers, as a share of the market, rose, increasing to 15.9 per cent in May, up from 15.8 per cent in April.
In trend terms, which strips out month-to-month volatility from the figures, the number of home loan approvals dropped only marginally, slipping 0.2 per cent during the month.
Meanwhile, loans approved for the purchase of new dwellings eked out a minor increase, lifting 0.3 per cent on a seasonally-adjusted basis.