Demand for residential mortgage-backed securities from Australian issuers is holding up, despite concerns that rising interest rates could trigger higher arrears and default rates in mortgage portfolios.

Australian Finance Group upsized its latest issue, AFG 2022-1 Trust, from A$500 million at launch to $750 million.

AFG chief executive David Bailey said in a statement: “With the increased expectation that our economy is about to enter into a rising interest rates environment, AFG’s RMBS performance is supported by strong mortgage serviceability and a conservative LVR structure.”

AFG will pay a margin of 60 basis points over the one-month bank bill swap rate on the A1-S notes, which are worth $150 million and have a weighted average life of 0.3 years.

Pricing on the A1-L notes, worth $525 million and with a weighted average life of 2.9 years, is 120 bps over one-month BBSW.

The margin on the A2 notes, worth $33.7 million and with a weighted average life of 4.1 years, is 180 bps and the margin on the B notes, worth 25.1 million and with a weighted average life of 4.1 years, is 220 bps.

The C, D, and E notes were priced at margins between 250 and 460 bps.

The widening margin trend continues. AFG is paying more than issuers of recent comparable securitisation deals, including Columbus Capital, which completed a $1.5 billion deal in February and paid a margin of 100 bps for $725 million of notes with a weighted average life of three years.

Resimac completed a $1 billion deal last month, paying a margin of 95 bps for A2 notes worth $1810 million and with a weighted average life of 2.9 years.