Latest lending data from the Australian Bureau of Statistics shows $30.3 billion in new housing loans were committed in September, a 1.4 per cent dip compared to the prior month.

The biggest fall was felt in owner-occupier loans which tumbled 2.7 per cent compared to August, making it the eight straight month the category has declined.

On an annual basis, owner occupier loans remain 20.8 per cent higher than the same time last year.

The most recent lending data comes one day ahead of the anniversary of the Reserve Bank's last interest rate cut, which brought the central bank's primary monetary policy lever to 0.1 per cent.

A lower cash rate enables Australia's banks and lenders to pass on cheaper loans to consumers and businesses, in a bid to spur on more economic growth.

The fall in rates to historic lows has seen variable and fixed mortgages to fall below 2 per cent.

RateCity data shows 202 bank and non-bank lenders are still offering rates below the 2 per cent threshold, despite longer term fixed-rate loans seeing hikes across the lending sector.

Last Wednesday, the release of the third quarter consumer price index defied market expectation and revealed inflation to the 12 months to September rose 3 per cent.

That rise is in the upper bounds of the RBA's ideal inflation target, prompting financial markets to price in a potential rate hike next year.

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RBA governor Philip Lowe has maintained the cash rate would remain at existing levels while inflation is below 2 to 3 per cent.

However, a number of market commentators believe the RBA will have to act earlier to ensure inflation levels remain stable.

Economists believe the RBA is likely to drop its short-term bond yield target if inflation continues to spur on above the target range.

ANZ economist Adelaide Timbrell said a drop of the yield target by the RBA would likely see further falls in new home lending activity.

"We expect total new housing lending to start to fall sharply once interest rates rise," Ms Timbrell said in a note.

"Fixed mortgage rates are already rising and could rise further if the RBA drops its yield target, as we expect."

Investor-only home loans did a surge compared to the prior month, reaching its highest value since April 2015 at $9.6 billion.

RateCity research director Sally Tindall flagged it is no shock new owner-occupier lending has dropped given the heightened affordability issues plaguing Australia's housing market.

"With property prices now painfully out of reach for many first home buyers, particularly in Sydney and Melbourne, there is a growing sense of hopelessness for anyone not yet in the market," she said.

"It's hit a point where unless first home buyers get significant help from their parents, the great Australian dream of owning a home is turning into a nightmare for many people."

Victoria recorded the biggest falls in new home lending, dropping 16.7 per cent, while New South Wales fell 3.1 per cent.

The ACT rose 1 per cent over the month.

RateCity also suggest the hike in fixed rates has cooled off refinancing activity within the lending sector.

According to the ABS, personal finance lending rose 0.4 per cent of the month and business lending jumped 13 per cent in most part to increased construction financing.

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