AFG: record 46% upgrader share drives demand as brokers lodge $26.8 billion in home loans

Australian Finance Group brokers lodged 36,720 mortgages valued at $26.8 billion in the first quarter of FY27, with upgraders accounting for a record 46% of residential lodgements.

Lodgement value was down 4.5% on the prior quarter and 12.4% on the same quarter last year, while the average loan size reached a record $730,145.

AFG chief executive officer David Bailey, said the result demonstrated the underlying resilience of the broker channel despite softer market conditions and significant changes to government policy.

"Following several record-setting quarters, some moderation in activity was expected, especially after the groundswell of uncertainty following the changes in the May Federal Budget and higher cash rates," Bailey said.

Borrower behaviour continued to shift during the quarter, with upgrader activity rising to a record 46% of residential lodgements–the highest level in AFG‘s data.

In September this approached 49%, supported by an average loan size still at May 2026 levels despite the well-documented reduction in housing prices across the market.

"Our experience has always been that when Australians experience turbulence in house prices, upgraders are the first to react, and in a changing rate environment, refinancing enquiry from customers begins to increase," Bailey said.

"That lift in refinancing has yet to materialise, but history suggests it is not far away."

Bailey said upgraders accounted for a large percentage of lending activity.

"While overall lodgements eased from the record highs achieved a year ago, upgrader activity continues to hold up well," Bailey said.

Upgraders now account for almost half of all residential lending activity and remain a significant source of market demand."

Investors ease while first home buyers hold steady

As anticipated, Investor activity eased from 34% to 32% during the quarter but remains above the levels some predicted, while first home buyer participation remained steady at 12%.

With house prices easing and the interest rate outlook still unclear, this cohort of customers is biding its time, with demand likely to return once conditions stabilise.

NSW leads as Western Australia records first annual decline‍

• New South Wales remained the largest market with residential lodgements of $8.6 billion, followed by Victoria at $7.8 billion and Queensland at $4.9 billion. Year-on-year declines were reasonably consistent across these three markets, ranging from 13% to 14%.

• Western Australia recorded residential lodgements of $3.8 billion, down 10.5% from the prior quarter and 6.2% from the same quarter last year, its first year-on-year decline following 11 consecutive quarters of growth.

• Whilst the upgrader activity influenced the national average loan size to a record $730,145, the national loan-to-value ratio eased slightly to 63.1% from 63.4% in the prior quarter, remaining among the lowest levels recorded in recent years and reflecting overall sound credit quality being maintained.

"Refinancing activity remains unusually low for this stage of the interest rate cycle, with serviceability constraints and rate uncertainty weighing on homeowners, while lenders work hard to retain existing customers," Bailey said.

Major lenders and their associated brands accounted for 70% of lodgement volume, compared with 30% for non-major lenders.

“The first quarter of FY27 has been defined by a market coming to grips with government policy changes, falling house prices and a more uncertain interest rate environment,” said Bailey.

“However, as the quarter progressed, we saw early signs of strength and resilience in overall lending activity.”