Home loans plunged in February as the share of first-home buyers continue to decrease. This is home loan’s second consecutive month drop with New South Wales posting its biggest monthly decline in fourteen years.

According to the Australian Bureau of Statistics, the number of home loans fell to 45,393 which is 5.6 per cent in February, following a revised 6.3 per cent drop in January. The sum was lowest number of home loans approved since February of 2001.

The flooding in Queensland and Victoria disrupted the sales of the home loan market, thus the demand for such loans slumped this year.

Matthew Circosta, Moody's Economy.com analyst, said "Home loan demand clearly struggled amid intense flooding across the eastern states in the early part of 2011, keeping home buyers, investors and builders on the sidelines. Prior to January, home loan demand had been recovering on the back of falling unemployment and rising incomes, even amid higher borrowing costs."

The sum of home loans in New South Wales dropped 10.1 per cent in seasonally adjusted terms. It is the lowest plunge it ever had since February 1997, the ABS reported. Victoria, on the other hand, did better than the national average but still saw a drop.

In addition, Senior economist of RBC Capital markets Su-Lin Ong explained, "What’s a little worrying is that there are such big drops in the early part of this year. The drop has more than wiped the out gains in the second half of last year when we saw a string of modest increases and what looked to be a little bit of resilience in households and housing in general.”

Any upturn in housing will be coming off a lower base, Ms Ong said, adding that the February data suggests the Reserve Bank can continue to leave interest rates where they are for now. The Reserve Bank’s goes with this as it decides to keep rates steady at 4.75 per cent, a level they have been at since November.