The person arranging your loan is almost certainly paid by the lender, not you
Mortgage brokers now handle most new home loans in Australia. They offer real value through access to multiple lenders and expert guidance through complex lending policies, but their commission structure creates conflicts of interest that regulators and consumer groups have documented in detail. This step explains how brokers are paid, what protections exist, and how to tell whether yours is working for you or for the commission.
- 61% of borrowers under 35 prefer a broker over going direct to a lender .
- 88% of broker customers say they would use the same broker again .
- Only two of the five brokers CHOICE tested proactively explained how they were paid .
The person sitting across from you is almost certainly a broker, not a bank employee. You need to understand how they are paid and what that means for the advice you receive.
How brokers are paid shapes every recommendation they make
Brokers do not charge you a fee. They are paid by the lender after your loan settles. This is the single most important thing to understand about the broker model, because it determines whose money is at stake in the recommendation.
There are two types of commission.
Commission Type | How It Works | Typical Rate | Example on a $600,000 Loan |
|---|---|---|---|
Upfront commission | A one-off payment from the lender when your loan settles | 0.65% to 0.70% of the loan amount | $3,900 to $4,200 |
Trail commission | An ongoing annual payment for every year you stay with that lender | 0.15% to 0.275% of the outstanding balance | $900 to $1,650 per year |
The maths matters. On a $600,000 loan, the broker earns roughly $4,000 upfront. If you had borrowed $700,000 instead, that jumps to about $4,700. Over a 30-year loan, can exceed the upfront payment. The commission model means a broker earns more when you borrow more and when you stay with that lender longer.
If you refinance or pay off your loan within the first 1 to 2 years, the lender claws back some or all of the from the broker . A broker who suspects you might refinance soon has a financial reason to discourage it. Federal regulations cap the maximum period at 2 years and prohibit brokers from passing clawback costs to you .
Before 2021, brokers only had to recommend a loan that was "not unsuitable." That is a low bar. A loan could be mediocre and still pass. The Banking Royal Commission recommended that borrowers, not lenders, should pay broker fees . The government did not go that far. Instead, it introduced the . The same reform banned volume-based bonuses and soft-dollar benefits, so brokers can no longer earn trips, prizes, or bonus payments for hitting lending volume targets with specific lenders .
The benefits are real, but so are the conflicts CHOICE documented
For most borrowers, a broker is the stronger starting point. A bank employee can only offer that bank's products. A broker typically has a of 20 to 40+ lenders, and many access 60 or more through their . If you have variable income, a small deposit, existing debts, or are self-employed, a broker who knows which lender will approve your profile can save you from a declined application, which shows up on your credit file. The broker also handles the paperwork, chases up valuations, and manages lender conditions — significant administrative support for a first purchase. And you do not pay them directly; the lender pays the commission out of their margin, which you would pay whether you went through a broker or not.
But the conflicts are real. CHOICE sent five home buyers to three of Australia's largest mortgage broker businesses and published the findings in November 2025 . One borrower reported that their broker set a tight timeline on an offer and refused to meet unless the borrower was ready to sign an application form . The borrowers deliberately did not ask about commissions to see how many brokers would raise it themselves. Only two did . Two brokers recommended a couple leave an existing paid-off loan of over $400,000 open and take out an additional $600,000 loan, creating combined debt of over $1 million secured against their home . Professor Kevin Jameson from Macquarie University reviewed the findings and concluded: "Too often this was not a process driven by giving good advice. It comes across as a process where the applicant is provided with (or upsold to) what they think they want or need... this is not always in the best interest of the client" .
Neither channel is conflict-free. A bank employee has no incentive to tell you a competitor has a better rate. A broker has an incentive to recommend a larger loan. The difference is that brokers now have a legal duty to prioritise your interests . Bank employees do not.
Factor | Mortgage Broker | Direct to Bank |
|---|---|---|
Product range | 20-60+ lenders on panel | That bank's products only |
Best for | Complex situations, first-time buyers, comparing options | Simple applications with a bank you already use |
Cost to you | No direct fee | No direct fee |
Who pays them | Lender pays commission | Bank employee receives a salary |
Legal duty | Must act in your best interests (since 2021) | Must not recommend unsuitable products, but no best interests duty |
Potential conflict | Earns more when you borrow more | May push that bank's products even when a competitor offers better terms |
Four questions tell you whether your broker is working for you
Ask these at your first meeting. The answers reveal a lot.
How many lenders are on your panel? A panel of fewer than 20 lenders is narrow. If they only recommend products from 2 or 3 lenders out of a panel of 40, ask why.
Which lender pays you the highest commission? Brokers are required to provide a disclosing their commission structure . If they are reluctant to discuss it, that tells you something.
Why this loan over the alternatives? Under the , the broker should be able to explain why the recommended product suits your situation specifically. "It's a good rate" is not enough. You want to hear references to your deposit size, income type, or feature requirements.
What happens if I want to refinance in 12 months? This reveals whether the broker will support a future move or whether the clawback creates resistance.