Surging numbers of homes are being passed in at auction as higher interest rates weigh on demand and the number of properties for sale hits highs not seen since 2021.

The national auction clearance rate last week was just under 57%, the lowest this year, with Sydney’s at 55%, Cotality data shows. The remainder includes both houses that did not sell at auction and houses withdrawn before auction.

The national rate had held at or near 66% from mid-2025 until January, excluding a typical end-of-year slip. The recent fall represents the biggest January-March slide in the clearance rate since the pandemic.

A rate closer to 70% indicates a seller’s market.

Luke Bindley, director at Sydney’s Austin Buyers Agents, said homebuyers had lost confidence in the wake of two interest rate hikes and the war on Iran sending prices higher across the economy.

“A lot of auctions are passing in or not even making it to auction day,” he said. “I don’t think it’s even worth taking your property to auction, unless it’s really special, at this point in time.”

Properties in Sydney’s outer suburbs were still popular but the inner city had become a “buyer’s market”, Bindley said.

Back-to-back interest rate hikes made it more difficult for buyers to afford a new loan.

The typical mortgage rate had risen to about 6%, from about 5.5% at the start of the year, meaning someone earning $107,000 could borrow about $535,000, or $25,000 less than they could have in January, Canstar found.

Loan Market data suggested the number of first home buyers in the market fell by a quarter from early February to early March, after the first rate hike.

First-time hopefuls had stepped back even in more affordable areas where competition has been stronger, such as Brisbane’s western corridor, according to the Loan Market mortgage broker Justin Hewitt.

“In the last two or three months, there’s a bit of a market slowdown, and [I’m] seeing a little bit more of investors and upgraders,” Hewitt said.

About two-thirds of his customers were first home buyers in late 2025 but they now accounted for a bit over one-third, Hewitt said.

Falling demand had coincided with a rising number of people attempting to sell their home, with the week of 23 March expecting to see 4,163 homes go to auction around the country – the highest number since December 2021.

Rising house prices in 2025 had pushed up sale profits, with resellers’ gains hitting a record $365,000 in December, Cotality found. More than 95% of those who resold their properties in the December quarter sold at a profit.

Home prices were still rising to new record highs in most capitals but Melbourne’s had slipped and Sydney’s sat flat over the last three months, daily Cotality data showed, encouraging homeowners and investors to sell up and cash out.

Interest rate hikes could encourage further selling as more homeowners will soon have expenses beyond their incomes, the Reserve Bank has warned.

Easing inflation and interest rates had seen the share of mortgaged owner-occupiers spending more than they earned fall from about 4.5% in 2023 to about 1.3% today, the RBA’s financial stability review found last week.

The review forecast resurgent interest rates and a pickup in unemployment would force the figure up above 1.6% by the end of 2026, forcing some to make the “difficult and disruptive” decision to sell their home.

Big banks expect the RBA to hike interest rates once more when it meets in May, while markets are betting on yet another increase by November.