Hopes of vendors were dashed across Sydney on Saturday as the combination of the huge amount of spring property on the market as well as Westpac’s lifting of interest rates during the week took its toll.

The auction clearance rate hit a three-year low of 65.1 per cent – a massive drop from last week’s 70 per cent and the lowest in three years.

“I don’t want use the word crash yet,” Domain Group senior economist Andrew Wilson said.

“Obviously there must be a correlation with the attention given to the interest rate rise.

“The higher interest rate clearly spooked an already skittish Sydney property market.

“It’s the lowest rate since the spring season of 2012. That was a pretty soft market then.”

AMP Capital chief economist Shane Oliver attributed the collapse entirely down to Westpac’s move on Wednesday to lift mortgage rates by 0.2 per cent, blamed on rules forcing the bank to hold more capital to become resilient to any future shocks.

“The bottom line is that buyers are worried that the Westpac move is a sign of things to come,” Dr Oliver said.

“I think the other big banks will follow, it’s only a matter of when … the big four are all subject to these pressures.”

Though he suspects they will wait to see what the Reserve Bank decides to do with the cash rate when it next meets, on Melbourne Cup Day. Many expect a rate cut.

“The Westpac move doesn’t kick in until November 20, so if the RBA cuts that could avoid lots of nasty headlines for the other banks,” Dr Oliver said.

The 65.1 per cent clearance is based on the 530 results in by Saturday evening from the 874 scheduled to go under the hammer. It followed last weekend’s 1020 auctions and months of higher than usual listings.

“I am disappointed, I can’t deny that,” said Jason Sukkar, with his wife Caroline by his side as his inner-city terrace passed in on a vendor bid of $3.2 millon. He’s thrown his heart and soul into building the four-level, four-bedroom home with four-car garage full of marble and lavish European finishes at 48 Great Buckingham Street, Redfern.

The Sukkars didn’t want to disclose the reserve though the talk in the neighbourhood was that it was well beyond $3.2 million. There were three registrations to bid but auctioneer Damien Cooley couldn’t extract one.

LJ Hooker Inner City agent Dominic Kuneman​ was trying to sound optimistic. “The market has changed but good properties will always sell regardless of what’s happening with the rest of the market,” he said.

“We’ve already had offers at around $3 million and we’ve now got good interest in the low $3 million range.”

It was a similar sort of day in the inner west, where a beautiful two-bedroom weatherboard at 43 Cove Street in Birchgrove passed in on a vendor bid of $1.48 million.

Offers of over $1.4 million had come from various parties in the lead-up to auction day, when five had been expected to register.

The vendor bid was $20,000 under the reserve price of $1.5 million.

Sales agent Peter Gordon of Cobden & Hayson said the market had turned in the buyers’ favour.

“We would have had 10 registered bidders even a few months ago and the auction might have gone crazy,” Gordon said.

Over on the lower north shore, a four-bedroom, three-bathroom home at 14 Angus Avenue, Lane Cove, passed in at $2,305,000. Three had registered to bid.

James Bennett of Belle Property Lane Cove had 13 contracts and there’d been more than 90 inspections.

Some vendors dropped their reserve prices to secure a sale.

At 9/100 Barcom Avenue, Darlinghurst, a two-bedroom, two-bathroom apartment with car spot sold for $1,225,000, $65,000 under its reserve. It was snapped up by a first-home buyer, a single woman from Paddington in her 30s.

BresicWhitney​ agent William Phillips says vendors had to lower their expectations to sell. “People are realising that prices aren’t on the up any more and they have to be more flexible.”

In the south, a three-bedroom, three-bathroom apartment at 25 Bonanza Parade, Sans Souci, sold for $1,753,000 – $47,000 under reserve.

A local developer snapped it up, beating seven other builders and families wanting to build a dual-occupancy property. Ray Fadel of Raine & Horne Sans Souci had 21 groups inspect the 743 square-metre block. He issued 15 contracts.

There were still some impressive results. On the lower north shore, two properties in neighbouring harbourside suburbs sold under the hammer, both for $4,255,000.

Selling agent, Brent Courtney of McGrath Lane Cove had seven parties competing for 19 Dettmann Avenue in Longueville taking the result $355,000 over reserve. There were four registered bidders on 71 Carlotta Street in Greenwich, with the reserve undisclosed.

At Kogarah, vendors Yvonne Balakian and Steven Sammut celebrated after selling their four-bedroom house under the hammer for $1,475,000. The house had been marketed with a price guide of more than $1.3 million. Selling agent, Lisa Sherry of PRDnationwide Woodward-Ramsgate refused to disclose the reserve.

“I’ve been to a lot of auctions today and a lot of passed in so I think they were very lucky,” said Sherry.

Will Hampson of My Auctioneer sold six of 10 homes under the hammer on Saturday.

He said the lowering of clearance rates reflected a return to normalcy, from the “dizzy heights” of the early 2015 market.

“There is no need for doom and gloom, the media and analysts are talking the market down, but [60 per cent clearance] is a respectable figure and the marketplace is a healthy one at the moment,” he said.