AFG’s latest figures have revealed softer mortgage activity alongside a marked shift in reported lender shares.
Major mortgage aggregator Australian Finance Group (AFG) recorded $26.8 billion in mortgage lodgements in the September quarter, down 12.4 per cent annually, while major lenders’ reported share increased to 70 per cent.
Its FY2026–27 Q1 index captured 36,720 applications, compared with 38,583 worth $28 billion in the preceding quarter and 43,799 worth $30.5 billion a year earlier.
Lodgement value fell 4.5 per cent quarterly but remained above historical averages, AFG said.
Major lenders, meanwhile, accounted for 70 per cent of lodgements, against 58 per cent in the previous quarter, while non-majors’ share fell from 42 to 30 per cent.
However, AFG flagged Macquarie Bank’s inclusion in its major-lender classification, which it said required caution when interpreting the reported increase as a competitive gain.
The majors’ investment share reached 64 per cent, from 54 per cent, with non-majors dropping to 36 per cent.
Their first home buyer (FHB) share rose to 76 per cent, from 72 per cent quarterly and 67 per cent annually; non-majors held 24 per cent.
Majors also attracted 66 per cent of refinances and 73 per cent of upgrader volumes, leaving non-majors with 34 and 27 per cent, respectively.
AFG chief executive David Bailey attributed the moderation to uncertainty following major policy and interest rate changes, while pointing to improving activity towards quarter-end.
“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.
“However, our 32-year history shows that in times of housing market uncertainty, the role of the broker remains critical. Activity built steadily through the quarter, with September the strongest month since the budget.”
Upgraders underpin demand
AFG also reported that average loan size hit a record $730,145, up 4.5 per cent annually, despite lower overall lodgements.
Upgraders represented a record 46 per cent of residential lodgements, against 42 per cent a year earlier.
Bailey said September’s share approached 49 per cent, with average loan size holding at May 2026 levels despite falling house prices.
The aggregator head highlighted upgraders’ growing importance within the borrower mix.
“While overall lodgements eased from the record highs achieved a year ago, upgrader activity continues to hold up well. Upgraders now account for almost half of all residential lending activity and remain a significant source of market demand,” Bailey said.
Investors accounted for 32 per cent of lodgements, down from 34 per cent quarterly and 36 per cent annually, while FHBs represented 12 per cent.
Refinancing contributed 15 per cent, against 17 per cent a year earlier.
Bailey said historical patterns suggested more refinancing interest could follow upgrader activity, but that recovery remained prospective.
“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,” he said.
“That lift in refinancing has yet to materialise, but history suggests it is not far away.”
He also identified borrowing constraints, rate uncertainty and lenders’ retention efforts as key obstacles to switching.
“Refinancing activity remains unusually low given the stage of the interest rate cycle. Historically, we would expect to see more borrowers shopping around, however serviceability constraints and uncertainty around interest rates are weighing on homeowners,” he said.
“In addition, lenders appear to be working hard to retain existing customers.”
WA’s growth run ends
NSW led residential lodgements with $8.6 billion, followed by Victoria’s $7.8 billion and Queensland’s $4.9 billion.
Annual declines across these markets ranged from 13 to 14 per cent.
Western Australia, meanwhile, recorded $3.8 billion, down 10.5 per cent quarterly and 6.2 per cent annually, ending 11 consecutive quarters of year-on-year growth.
National loan-to-value ratio (LVR) eased to 63.1 per cent from 63.4 per cent, which AFG said remained among recent years’ lowest readings, indicating maintained credit quality.
The group also outlined its product response to upgrader demand, alongside a smaller contribution from AFG Home Loans.
“AFG Home Loans accounted for 7.1 per cent of residential lodgements during the quarter, compared with 7.9 per cent in Q4 FY26. The recent rollout of an AFG Home Loans white-label bridging finance product will help meet the needs of upgraders buying and selling in a slower market,” Bailey said.
Bailey added that the quarter’s improving finish provided encouragement despite continuing uncertainty, with demand for broker guidance remaining strong.
“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,” he said.
“However, as the quarter progressed, we saw early signs of strength and resilience in overall lending activity. One thing remains clear: while market conditions continue to evolve, demand for the support and guidance brokers provide remains strong, positioning the channel to assist Australian borrowers throughout the property cycle.”
[Related: Mortgage burden edges towards near 40-year high]
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