Australian Finance Group Prices Record $1.2B RMBS After 60% Demand Surge
AFG prices record $1.2 billion RMBS transaction after strong investor demand
Australian Finance Group (ASX: AFG) has priced its largest-ever Residential Mortgage-Backed Securities (RMBS) transaction, with AFG Securities executing a $1.2 billion Prime RMBS issue on 13 February 2026. The AFG $1.2 Billion RMBS Issue was substantially upsized from an initial $750 million target, representing a 60% increase driven by strong institutional demand. This marks AFG’s 20th public RMBS issuance, with settlement scheduled for 26 February 2026, underscoring institutional confidence in the company’s mortgage portfolio quality.
The record-setting transaction size signals robust appetite for AFG’s mortgage-backed securities. Over 30 domestic and offshore investors participated in the issuance, including four new investors joining the programme. This broadening investor base supported both the significant upsizing and competitive pricing outcomes consistent with AFG’s $1 billion transaction completed in October 2025.
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What is an RMBS and why does this matter for AFG?
Residential Mortgage-Backed Securities represent a funding mechanism where mortgage originators bundle home loans into securities sold to institutional investors. AFG packages a pool of residential mortgages originated through its broker network, structures these loans into tiered notes with different risk profiles, and sells them to investors seeking exposure to Australian mortgage credit.
This funding model allows AFG to convert mortgage assets into immediate capital, which can then be deployed to write new loans without waiting for borrowers to repay over 25-30 year terms. By accessing capital markets directly rather than relying solely on warehouse funding from banks, AFG secures cost of funds certainty and maintains capacity to grow its loan book during periods of strong origination demand.
For AFG’s business model as both a mortgage originator and distributor, RMBS funding provides a critical third earnings pillar alongside trail commissions and upfront origination fees. Successful issuances at competitive pricing directly support margin sustainability across the lending business.
Investor demand drives upsizing and competitive pricing
The breadth of investor participation in the AFG $1.2 Billion RMBS Issue demonstrates market confidence in AFG’s credit quality. More than 30 domestic and offshore investors engaged across all tranches, with four new investors expanding AFG’s investor base beyond existing programme participants.
Pricing outcomes proved highly competitive, matching the margins achieved in the company’s $1 billion October 2025 transaction despite significantly larger issuance size. This pricing consistency indicates stable market perception of AFG’s mortgage book quality and the company’s established position in Australian RMBS markets.
David Bailey, CEO
“Strong demand across all tranches of Notes highlights the depth of our RMBS program and reinforces the positive sentiment towards Australian RMBS more broadly.”
The successful upsizing from $750 million to $1.2 billion provides AFG with cost of funds certainty for a significant portion of its loan book, supporting the company’s capacity to maintain competitive pricing for brokers and borrowers whilst preserving margin.
Transaction structure breakdown
The transaction features a nine-tranche structure weighted heavily towards senior AAA-rated notes, which comprise $1,145.6 million (95.5%) of the total issuance. Credit enhancement levels range from 10.00% for senior tranches down to 0.23% for the most subordinated rated class.
| Class | Rating (S&P/Fitch) | Amount (A$m) | Credit Enhancement | Margin (1M BBSW +) |
|---|---|---|---|---|
| A1-S | AAA(sf)/AAAsf | $377.6m | 10.00% | 0.70% |
| A1-L | AAA(sf)/AAAsf | $702.4m | 10.00% | 0.95% |
| A2 | AAA(sf)/AAAsf | $65.6m | 4.53% | 1.08% |
| B | AA(sf)/NR | $27.84m | 2.21% | 1.30% |
| C | A(sf)/NR | $13.12m | 1.12% | 1.45% |
| D | BBB(sf)/NR | $5.12m | 0.69% | 1.65% |
| E | BB(sf)/NR | $4.32m | 0.33% | 2.80% |
| F | B(sf)/NR | $1.28m | 0.23% | 3.75% |
| G | NR/NR | $2.72m | – | Undisclosed |
The predominantly AAA-rated structure with tiered credit enhancement reflects conservative underwriting standards across AFG’s mortgage book. Senior tranches priced at 0.70% to 1.08% over 1-month BBSW represent competitive funding costs relative to alternative wholesale funding sources.
AFG’s distinctive market position supports credit quality
AFG operates across the mortgage value chain as both an originator through its lending subsidiary and a distributor through its network of brokers. This dual positioning provides the company with proprietary insights into mortgage performance and emerging borrower behaviour trends.
CEO David Bailey emphasised this market intelligence advantage underpins AFG’s credit policies and risk management frameworks. The company’s visibility across mortgage origination, servicing, and performance data enables real-time adjustments to lending criteria as market conditions evolve.
David Bailey, CEO
“As both an originator and distributor of mortgages, AFG holds a distinctive position in the Australian home loan market, giving us valuable, real-time insight into mortgage behaviours and emerging trends.”
This integrated view across the mortgage lifecycle supports informed credit decisions at the point of origination. AFG’s lending practices, informed by actual broker and borrower behaviour data, sit at the heart of the company’s diversified earnings model.
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What this means for AFG’s growth strategy
The successful execution of the AFG $1.2 Billion RMBS Issue validates the funding strategy supporting the company’s growth trajectory. Consistent access to competitively priced capital markets funding enables AFG to maintain loan book growth without constraint from warehouse facility limits.
Key strategic outcomes from the transaction include:
- Record $1.2 billion issuance demonstrates programme scalability to support larger loan book growth
- Competitive pricing maintains margin sustainability across the lending business
- Expanded investor base with four new participants supports future issuance capacity
- Funding certainty for a significant proportion of the loan book enables continued competitive positioning
The transaction provides AFG with cost of funds certainty at a time when the company aims to grow its mortgage book through its broker network. According to CEO David Bailey, the company remains focused on delivering competitive home loan solutions for brokers and their clients whilst providing compelling opportunities for RMBS investors.
David Bailey, CEO
“We’re thrilled to have successfully upsized this record-setting transaction and remain focused on delivering highly competitive home loan solutions for our brokers and their clients.”
As AFG’s 20th public issuance, the transaction demonstrates the maturity and depth of the company’s securitisation programme. With settlement scheduled for 26 February 2026, the proceeds will be deployed to support continued loan book growth through the broker distribution channel.
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