Record-breaking quarter for AFG brokers

Modern 2-storey home

(ASX:AFG) The AFG Index released today shows another period of growth for AFG brokers to close out the first quarter of the 2021 financial year. More than 35,400 residential loans were lodged, with volume surpassing $18 billion for the quarter, eclipsing last quarter’s record-breaking levels.

AFG CEO David Bailey explained the results: “The first quarter of the 2021 financial year has seen AFG record its highest-ever lodgement volume and represents a lift of just over 8% on last quarter. Against the corresponding period in FY2020 it is 16% higher. The surge was largely driven by an uptick in First Home Buyers as they make the most of federal and state government incentives to support the country’s construction market.

“Mortgage brokers have played a vital role in ensuring first home buyers were in prime position to access the various incentives and understand their choices. A total of 23% of all lending applications processed by AFG brokers during the quarter were for those purchasing their first home.

“Whilst remaining stable, the refinance boom evident in the months during the broader national lockdown now appear to have returned to more traditional levels, whilst upgraders have maintained a strong position in the market,” he said. “Those who are confident in their own personal financial circumstances during the pandemic are looking for opportunities to move to a larger home.

“As brokers have navigated the challenges of this period of market disruption, their role as a trusted support for their customers has meant they have continued to assist customers across the country. Whilst understandably Victorian numbers have not reflected the broader Australian experience, the result recorded is still in line with that recorded in the last quarter of FY20, and still ahead of the same quarter last year.

“With record low interests expected to be maintained for an extended period property prices are being supported by a strong underlying demand for residential mortgage finance.

“Looking across the country, the Victorian lockdown has resulted in a flat result quarter on quarter, and the Northern Territory recorded a drop, whilst growth has continued in all other states. When compared to the same period last year, the increases show an alignment to the levels of lockdown in response to COVID-19 that have been experienced in each state – New South Wales was up 12.5%, Queensland and South Australia were both up 31% and Western Australia was up 38%.

Principal and Interest (P&I) loans continue to track upwards as more customers take advantage of the lower interest rates on offer to pay off their mortgages faster.

“Once again, although not reported in the AFG Index, a look at the number of AFG Home Loans’ securitized product customers seeking assistance with their mortgage payments provides an insight into current market conditions.,” he said. “Pleasingly, the numbers have further decreased. As of 8 October, the numbers of customers with deferral arrangements for their P&I loans has dropped from 4.34% at the close of last quarter to 0.87%. In addition, 2.22% of AFG Home Loans securitized product customers have switched from P&I to Interest Only repayment arrangements. This is down from 4.38% at the end of FY20.

With tight regulations affecting rental markets the number of people applying for Investment loans also dropped to its lowest level since December 2012, to now be sitting at 21% of the market.

“After a tough six months competing against cash-back offers and competitive fixed rates from the major lenders, the non-majors have regained market share, rising from 33.2% at end of FY20 to 41.1% in FY21 Q1

“The major lenders’ market share dropped from 66.8% at the end of the 2020 financial year, the highest level since 2017, down to 58.9% at the close of Q1,” said Mr Bailey. “This trend was most evident when looking at the majors’ share of refinances, which tumbled from a high of 71.1% at the end of the 2020 financial year to 58.1% at the close of Q1 2021.

“ANZ was the standout, recording a significant drop in market share, sliding from 25.53% back to 9.67%. The Westpac Group seemed to be the beneficiaries, rising from 10.37% to 16.27% of the majors’ market share.”

The non-majors experienced growth across all buyer types, with the biggest rises being recorded by Refinancers and Upgraders. The non-majors’ share of refinances jumped from 28.9% to 41.9% in FY21Q1 and market share for those upgrading increased from 34.4% to 41.2%.

Queensland and New South Wales lead the country for the non-majors, with market share increases in both states increasing by 10% and 8% respectively. Among the non-majors, Macquarie recorded the largest lift in market share, rising from 6.74% to 10.25% for the quarter.

“The national average loan size is decidedly lower, dropping from $542,555 at the close of the last quarter to $514,532. This drop is largely driven by the profile of borrowers, in this case the presence of more First Home Buyers in the mix. This corresponds with a small uptick in LVR, again a reflection of the volume of First Home Buyers in the data.

Download full report here


AFG successfully completes inaugural $500 million Non-Conforming RMBS issue

AFG Head office

Australian Finance Group Ltd’s (ASX: AFG) wholly-owned subsidiary AFG Securities Pty Ltd (“AFG Securities”) has successfully priced its inaugural non-conforming Residential Mortgage Backed Securities (“RMBS”) transaction.

The AFG 2020-1NC Trust $500 million issue is AFG Securities tenth issue since 2013, taking the total paper issued to the market by AFG Securities to $4.075 billion.

This being the first issue under its non-conforming program, the portfolio includes low-documentation and non-conforming loans originated by AFG Securities.

AFG Chief Executive Officer David Bailey highlighted the support received for the transaction from domestic and international investors. “We are very pleased to be able to upsize the transaction from $350 million to $500 million due to strong interest from both new and returning investors.”

“100% broker introduced, AFG Securities’ loans have always performed well and have consistently tracked well below the Standard & Poor’s Performance Index (SPIN),” said Mr Bailey. “Our underwriting standards, arrears-management processes and policies as well as our low historical arrears and loss performance, have informed the support of the transaction.”

Details of the notes are as follows:

Class Expected Rating S&P / Fitch A$M Amount Credit Enhancement (%) WAL (years) Benchmark + Margin
A1-S AAA(sf) / AAAsf 137.000 27.50% 0.7 1M BBSW + 0.90%
A1-L AAA(sf) / AAAsf 225.500 27.50% 3.1 1M BBSW + 1.55%
A2 AAA(sf) / AAAsf 92.750 8.95% 4.3 1M BBSW + 1.80%
B AA(sf) / NR 20.250 4.90% 4.3 1M BBSW + 2.65%
C A(sf) / NR 9.750 2.95% 4.3 1M BBSW + 3.65%
D BBB(sf) / NR 6.000 1.75% 4.3 1M BBSW + 4.70%
E BB+(sf) / NR 3.750 1.00% 3.8 1M BBSW + 7.85%
F NR / NR 5.000 5.1 Undisclosed
Z NR / NR Undisclosed

National Australia Bank Limited was the Arranger on the transaction and acted together with Commonwealth Bank Australia as Joint-lead Manager.


RBA’s cash rate for October unchanged at 0.25%

Reserve bank of australia sign

The Reserve Bank of Australia has today kept the cash rate at 0.25% for the 7th straight meeting in a row.

The RBA was widely predicted to reduce the rate further in October or November, although with the Federal Budget due today, the majority favoured a Melbourne Cup rate cut in November.

It has previously stated that it sees a cash rate of .25% as a floor but may need to consider the merits of a further reduction against other stimulus options, if signs of a recovery fail to emerge.

Rates are at a record low and lenders continue to offer very competitive rates. An AFG broker can answer your questions and look at your circumstances to make sure you’re prepared for what could be coming next. This could mean refinancing or approaching your lender for a better rate. Because an AFG broker does this type of work every day, and has a pretty good idea what lenders can do to win or keep your business.

If you’d like to chat about the best way to manage your mortgage as the COVID-19 crisis continues to unfold, please don’t hesitate to get in touch with an AFG broker.