Property prices have fallen sharply since the RBA started lifting official interest rates in May. At that point,the cash rate was 0.1 per cent. Earlier this month,it was increased to 2.35 per cent.
Sydney house values fell 2.6 per cent in August and have now edged down by $927 a day since the end of April. In Melbourne,values fell another 1.5 per cent last month to be down by $51,000 over the past five months.
Kearns said higher interest rates affected the property market by limiting the amount of money people could borrow.
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Last year,the Australian Prudential Regulation Authority tightened how much a potential home buyer could borrow. Banks now have to ensure a customer can withstand a 3 percentage point increase in interest rates,compared to a 2.5 percentage point lift previously.
Kearns said at the time,it was expected this increase in the buffer would take some heat out of the property market and reduce the maximum available mortgage for prospective buyers by up to 5 per cent.
But the increase in official interest rates since May was having a much bigger impact on how much people could borrow.