AFG prices $1.2 billion Prime RMBS transaction
Australian Finance Group (ASX: AFG) has announced that its subsidiary, AFG Securities Pty Ltd, has priced a A$1.2 billion Prime Residential Mortgage-Backed Securities (RMBS) transaction, expected to settle on 29 September 2026. The transaction attracted strong demand from both domestic and international investors. This marks AFG’s 21st term RMBS transaction, bringing total cumulative issuance to $13.1 billion, and matches the A$1.2 billion Prime RMBS the company issued in February 2026, which was the largest issuance in AFG’s history at that time.
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What is an RMBS and why does it matter for AFG?
A Residential Mortgage-Backed Security (RMBS) is a financial instrument created by pooling a group of home loans and selling interests in that pool to investors as a structured security. Investors receive regular payments derived from the mortgage repayments made by homeowners. For AFG Securities, issuing RMBS is not a peripheral activity — it is a core mechanism for funding the home loans written through AFG’s extensive broker network.
More than 50% of AFG Securities’ total outstanding funding is sourced from long-term RMBS issuance, underscoring how central this channel is to the business model. The interest rates on the notes in this transaction are expressed as a spread above BBSW (Bank Bill Swap Rate, the benchmark Australian short-term interest rate), meaning investors are compensated above the prevailing market rate based on the credit quality of each note class.
For investors assessing AFG, a company that can consistently access wholesale RMBS markets at scale has a more resilient and scalable lending business. It reduces dependence on short-term or bank funding and supports the ongoing growth of AFG Securities’ loan book.
Transaction details at a glance
The transaction is structured across nine note classes, with the bulk of the deal concentrated in the senior AAA-rated tranches. The A1S and A1L classes are sized at $384,000,000 and $696,000,000 respectively, both carrying expected ratings of AAAsf/AAAsf from Fitch and S&P respectively.
| Class | Issue Size A$(m) | Initial Credit Support | Fitch/S&P Rating | Interest Rate | Expected WAL |
|---|---|---|---|---|---|
| A1S | $384,000,000 | 10.00% | AAAsf/AAAsf | BBSW + 73 bps | 0.4 yrs |
| A1L | $696,000,000 | 10.00% | AAAsf/AAAsf | BBSW + 103 bps | 2.9 yrs |
| A2 | $60,590,000 | 4.95% | AAAsf/AAAsf | BBSW + 120 bps | 3.8 yrs |
| B | $26,530,000 | 2.74% | AAsf/NR | BBSW + 140 bps | 3.8 yrs |
| C | $18,600,000 | 1.19% | Asf/NR | BBSW + 160 bps | 3.8 yrs |
| D | $5,280,000 | 0.75% | BBBsf/NR | BBSW + 175 bps | 3.8 yrs |
| E | $4,560,000 | 0.37% | BBsf/NR | BBSW + 290 bps | 3.8 yrs |
| F | $1,320,000 | 0.26% | Bsf/NR | BBSW + 405 bps | 3.8 yrs |
| G | $3,120,000 | 0.00% | NR/NR | ND | 5.0 yrs |
The investment-grade weighting of the deal is notable. The three AAA-rated classes (A1S, A1L, and A2) are sized at $384,000,000, $696,000,000, and $60,590,000 respectively, reflecting strong credit quality across the underlying mortgage pool and confidence from two major ratings agencies. The G class, representing $3.12 million, carries no external rating from either Fitch or S&P and has no disclosed interest rate.
Funding program strength and what comes next
AFG Chief Executive Officer David Bailey commented on the transaction’s significance for the company’s funding strategy:
David Bailey, CEO, Australian Finance Group
“We are very pleased with the response to this transaction and the breadth of engagement from investors in Australia and international markets.
This transaction further supports the strength and diversity of our funding program and provides an important foundation for AFG Securities to continue delivering competitive home loan solutions for AFG brokers and their customers.”
Bailey’s remarks point to two considerations of strategic weight. First, the diversity of the investor base, spanning domestic and international participants, demonstrates that AFG’s RMBS program continues to attract broad market engagement. Second, the funding secured through this transaction underpins AFG Securities’ capacity to keep writing competitive home loans through AFG’s broker network.
The milestone of 21 term transactions and $13.1 billion in cumulative issuance reflects a funding program with considerable depth and track record. With more than 50% of AFG Securities’ total outstanding funding sourced from long-term RMBS, this channel represents a structurally significant component of the company’s balance sheet management. Repeated access to RMBS markets at this scale signals ongoing capital markets credibility and supports the growth trajectory of AFG Securities’ lending operations.
AFG’s February 2026 RMBS issuance was upsized 60% from its initial $750 million target to reach $1.2 billion, with over 30 investors participating and four new investors joining the programme, setting the benchmark that this latest transaction matches in size.
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