Mortgage sales fell 3.7 per cent in July, on fears of an interest rate rise and the carbon tax, a major broker says.

The Australian Finance Group (AFG) Mortgage Index showed the greatest fall was in Victoria (7.4 per cent), with losses also recorded in NSW (5.9 per cent), Western Australia (5.0 per cent) and Queensland (0.5 per cent).

AFG general manager of sales and operations Mark Hewitt says home borrowers have gone into their shells since the most recent cash rate rise in November 2010.

He says the figures show Australians are still worried about their financial future.

“Domestic financial news is dominated by talk of rate rises and the carbon tax,” Mr Hewitt said in a statement accompanying the index’s release on Thursday.

“Gloomy international financial news has seen stock markets slump.

“We’re all looking for strong economic leadership to provide the market with some much needed confidence.”

The data shows refinancing remains the most active part of the mortgage market, making up 39.1 per cent of loans in July.

The proportion of owner-occupiers arranging mortgages to move or upgrade their homes was 11.7 per cent of all mortgages in the month.

AFG says it provides more than 20 per cent of brokers access to lending institutions and has a mortgage book in excess of $65 billion.