New home loans have fallen at their second-fastest rate in the past two decades, dropping 8.5 per cent in July, as rising rates and falling house prices put more buyers on the sidelines.

That drop in lending was sharper than most analysts expected – market consensus was for a 3.5 per cent decline month-on-month – and the largest on record, apart from the sudden decline in lending in May 2020, in response to the initial outbreak of COVID-19.