Upgraders drive record June quarter for AFG

Homeowners looking to trade up have become an increasingly dominant force in the broker market, with upgrader activity reaching near record levels, according to new data.

New figures from Australian Finance Group (AFG) revealed upgraders accounted for 44 per cent of the aggregator’s residential mortgage lodgements in the June quarter, up from 43 per cent in the previous quarter and a level reached only twice before over the past decade, in 2018 and 2022.

The shift came as AFG brokers lodged $28.1 billion in home loans during the quarter, making it the aggregator’s strongest June quarter on record and 1.4 per cent higher than the same period last year.

This was a slight move down from the previous quarter’s posting of $29.5 billion.

The number of lodgements, however, eased to 38,583 in the June quarter from the record 43,799 recorded in the first quarter of FY26 and the 40,810 in the same period last year, a moderation that AFG attributed to borrowers reassessing their plans following the Federal Budget and recent cash rate increases.

The average loan size climbed to a record $727,345 in the June quarter, up 2.4 per cent from $710,388 in the previous quarter and 7.2 per cent from $678,333 a year earlier.

Investor activity softens

Investor lending lost some momentum, with investors accounting for 34 per cent of AFG’s residential lodgements, down from 35 per cent in the previous quarter, but unchanged from the June quarter last year (34 per cent).

When taken as a stand alone month, however, investor demand softened further to 32 per cent in June.

The figures align with broader reports from brokers and lenders following the Federal Government’s changes to negative gearing, capital gains tax and subsequently self managed super fund borrowing.

In May, Westpac’s chief economist Luci Ellis forecast that new investor activity could fall 34 per cent in the near term, and total housing market turnover could decline by 20 per cent.

AFG chief executive David Bailey said borrower activity had become more uneven towards the end of the quarter as households assessed the policy changes.

“Following the strongest March quarter on record, some easing in June was expected, especially after the Federal Budget announcements on 12 May and during a tightening rate cycle,” he said.

“We have seen patchy investor volumes as the market absorbs the new settings, and the data is consistent with some borrowers pausing or reassessing plans.”

“We view this as transitional, and broker demand has remained resilient.”

First home buyers remain resilient

First home buyers (FHB), meanwhile, continued to hold their ground despite affordability pressures.

The borrower segment accounted for 12 per cent of residential lodgements during the quarter, unchanged from a year earlier and the previous quarter, with AFG saying there had been “no noticeable impact” from the Budget changes so far.

However, the figures contrast with recent broker data, which has pointed to weaker first-home buyer activity following the Budget announcement.

Earlier this month, Sebastian Watkins, CEO of Lendi Group, which operates Aussie Home Loans, said that since the announcement of the budget, FHB lodgements had slumped by 20 per cent.

Loan Market data also found that FHB loan applications fell by 16 per cent in June compared to the four weeks before the budget announcement, and investor loans fell by 19 per cent in the same period.

At the close of 2025, FHB demand had been lifted following the expansion of the federal government’s 5 per cent Deposit Scheme in October.

Principal-and-interest loans accounted for 74 per cent of all mortgage lodgements in the June quarter, down from 78 per cent a year earlier, while interest-only lending continued to rise, reaching 25 per cent of all loans.

LVRs at record lows

AFG’s data also found that borrowers have continued to enter the market with larger deposits, with the national loan-to-value ratio (LVR) falling to 63 per cent in the June quarter, the lowest level recorded in AFG’s data.

Average LVRs have been fluctuating down since their Q2 2021 peak of 73.5 per cent.

At the same time, the average loan size reached a record $727,345, suggesting borrowers are contributing more equity despite rising property values.

The report also pointed to a possible shift in refinancing activity, which edged up to 16 per cent after falling to a record low of 15 per cent in the previous quarter.

AFG said the increase could signal the refinancing cycle has reached its floor as higher interest rates continue to flow through to household budgets.

“It is still at the lower end of the long-term averages and as interest rate movements kick into household budgets, our expectation is that this will lift,” said Bailey.

[Related: Auction retreat prompts more measured buyers, brokers say]

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