The Australian housing market remains challenging for first-home buyers (FHBs), who are often seen as a key indicator of the mortgage cycle's health. Despite the ongoing cost-of-living pressures and constraints on borrowing capacity, demand from FHBs has shown resilience. In 2024 alone, 125,220 FHB loans were issued, marking an increase of approximately 5.9% from the previous year. Projections for 2025 suggest a further rise to around 133,000 loans, a 6.5% increase. This growth is occurring alongside a broader shift in lender incentives, moving away from broad cashbacks towards more targeted strategies like fee waivers.

AFG Securities, the lending arm of the Australian Finance Group, has chosen to waive settlement fees on certain FHB products. The fee waiver applies exclusively to first home buyer applications for the AFG Home Loans Retro Full Doc and AFG Home Loans Link Premium products, submitted by 31 October 2025 and settling before 31 December 2025. This decision aims to reduce upfront costs for borrowers at a crucial decision-making moment. "It's a small-ticket saving against a six-figure loan," explained an industry analyst, "but it removes a highly salient pain point at the exact moment of decision."

The strategic rationale behind this move is clear: by foregoing a small amount of non-interest fee income, AFG aims to improve conversion rates in a segment with high lifetime value. Analysts have pointed out two immediate benefits of this approach. Firstly, it positions AFG Securities as a FHB-friendly lender without distorting headline rates or resorting to costly cashbacks. Secondly, it empowers brokers to present a tangible out-of-pocket saving to clients who are often deposit-constrained. This is especially beneficial when combined with state concessions and the federal Home Guarantee Scheme.

The implementation of this fee waiver involves several technical adjustments. Lenders must align product disclosure, credit policy, systems, and broker tools to ensure seamless execution. This includes defining clear eligibility rules for FHB status, updating pricing engines and loan origination systems, and providing brokers with concise, outcome-focused collateral. These steps are crucial to maintaining transparency and compliance with ASIC regulations.

AFG Securities' broker-first channel magnifies both the risks and rewards of this initiative. "If the policy is simple and the savings are undeniable at the decision point, brokers will use it," noted a spokesperson from AFG. "If eligibility is opaque, the signal is lost."

While comprehensive market data on the initiative's uptake is still emerging, the microeconomic implications are straightforward. Forgoing a $699 fee on a $500,000 loan equates to roughly 14 basis points of principal. If AFG's net interest margin (NIM) is 100 basis points, the fee waiver represents about 14% of the first-year margin. The break-even point requires either a small uplift in conversion rates or a marginally longer loan life.

For brokers, the practical impact of AFG's decision is significant. Lenders that streamline upfront costs and documentation are likely to gain a larger share of broker recommendations. For regulators, the focus remains on ensuring clear disclosure and fair treatment, preventing incentives from driving unsuitable borrowing or obscuring long-term costs.

The broader competitive dynamics of the market are also at play. Fee waivers are seen as a lower-cost alternative to cashbacks, and if AFG's initiative resonates, other lenders may follow suit. Major incumbents might counter with bundled offers, such as valuation or application fee waivers, to avoid reigniting costly cashback wars.

As the housing market continues to evolve, AFG Securities' move offers valuable lessons for decision-makers across the industry. "Target the moment of maximum salience," advised an industry expert. "Small, immediate savings at settlement can outperform larger, deferred benefits in driving decisions—especially in high-stress transactions."

Looking ahead, the most effective lenders will likely focus on stacking incremental, practical benefits like fee relief and fast turnarounds, rather than relying solely on blunt pricing moves. In a market where FHB volumes are set to grow and affordability remains tight, the winners will be those who compete on reducing friction, not just on interest rates.