The Housing Industry Association (HIA) sought on Wednesday for interest rate cuts amid weak home sales.

Total new homes sold in August went up by 1.1 per cent across Australia to 6,497. In July, total new homes sold went down 8 per cent to 6,428 which is the lowest level since December 2000.

"There is unwillingness on the part of households to commit given the uncertain domestic and global economic conditions which currently prevail, and that is understandable. That's where interest rate cuts and fiscal stimulus can play an important role in boosting new housing supply in a very competitive market, which in turn would have a positive multiplier effect in bolstering the wider domestic economy," HIA chief economist Harley Dale said in a statement.

Experts attribute the weak home sales to global financial uncertainty which had led to very high demand for fixed-rate mortgages. Loan Market, one of Australia's leading lenders, said fixed-rate products now account for 30 per cent of mortgage inquiries it got when in January there was zero queries for such products.

The HIA call came as Australian bank Westpac announced on Tuesday a rate reduction for several fixed-rate home loan products. Westpac reduced its three-year Premier advantage package rate by 15 basis points to 6.44 per cent and one- and two-year loans by 20 basis points to 6.49 per cent.

"Despite the prospect of a long overdue cash rate cut, consumers have been taking a close look at these highly attractive fixed rate packages on offer," Loan Market Chief Operating Officer Dean Rushton told News.com.au.

According to financial comparison website RateCity, if the Reserve Bank of Australia (RBA) would increase the cash rate and retail banks would follow the hike with larger increases, number of new home buyers would contract by a third.

RateCity Chief Executive Officer Damian Smith said that when the RBA increased the key lending rate in November 2010 by 25 basis points to 4.75 per cent, the typical first home buyer had to pay $61 more monthly in mortgage repayments compared to 12 months ago when the cash rate was 4.5 per cent.

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