Consumer sentiment has fallen to its lowest level in two years, and consumers are losing faith in real estate as a wise investment according to a new study.

June's Westpac-Melbourne Institute Index of Consumer Sentiment has indicated a 2.6% fall from May's result. Westpac chief economist Bill Evans said the result is the lowest since June 2009. While households showed confidence in the near term outlook for the Australian economy, Evans said the result was offset by the respondents' concern for their personal financial positions. He commented that fears of rising interest rates could be behind the dampended consumer outlook.

"The explanation for why the Index continues to print such soft results must lie in those factors which are so depressing respondents' assessments of their own financial position," Evans said. "The commentary from the media and out own research indicates that households still expect rates to be rising over the next 12 months."

Evans also pointed out an increasing shift in consumer preference toward low-risk investments, with the proportion of respondents nominating bank deposits as the wisest form of savings increasing from 27.1% in March to 32% in June. Real estate, however, fared poorly in consumer sentiment. It was nominated as the wisest investment by 14.6% of respondents, down from 21.7% a year ago. Evans said it was the lowest proportion in the history of the series dating back to 1974, excluding the GFC.

In light of the survey, Westpac has predicted the RBA could hold off raising interest rates until November.

"We expect that the Board is still inclined to raise rates but economic reports like the employment report last week and the evidence from this survey as to how concerned and cautious households currently have become are making it very difficult for the board to make the case," Evans said.