Key Takeaways
When it’s time to get a home loan, one of the first decisions you’ll face is whether to go directly to a bank or use a mortgage broker. It’s a choice that can have a significant impact on the interest rate you pay, the features you get, and the overall cost of your loan over its lifetime.
The trend in Australia is clear: more borrowers are choosing brokers than ever before. According to the MFAA, mortgage brokers now arrange over 70% of all residential home loans. But understanding why (and whether it’s the right choice for you) requires looking at the differences in detail.
A mortgage broker is a licensed finance professional who acts as an intermediary between you and multiple lenders. Rather than representing a single bank, a broker has access to a panel of lenders (typically 30-50 or more), and their job is to find the loan that best fits your specific needs.
Here’s what a good broker does throughout the process:
Needs assessment: Understanding your financial situation, goals, and preferences. Are you a first home buyer needing help with government grants? A self-employed borrower with complex income? An investor looking for a specific loan structure? Your broker tailors their recommendations to your circumstances.
Lender comparison: Researching and comparing products across their entire lender panel. This includes interest rates, fees, features (offset accounts, redraw, split loans), approval timeframes, and policy differences that affect your specific situation.
Application management: Preparing and submitting your loan application with all supporting documents. A broker knows exactly what each lender requires and presents your application in the best possible light. They handle the follow-up, respond to lender queries, and keep the process on track.
Negotiation: Brokers can often negotiate better rates or fee waivers that aren’t available to walk-in customers. Lenders know that brokers can move business elsewhere, which gives them leverage to secure competitive pricing.
Ongoing support: A broker’s relationship doesn’t end at settlement. Good brokers conduct annual loan reviews, alerting you to better deals and ensuring your loan remains competitive as the market changes.
| Feature | Mortgage Broker | Going Direct to Bank |
|---|---|---|
| Lender options | 30-50+ lenders | 1 lender only |
| Cost to you | Free (paid by lender) | Free |
| Rate negotiation | Strong leverage across panel | Limited to that bank’s range |
| Paperwork | Broker handles everything | You manage the process |
| After-hours access | Often available evenings/weekends | Branch hours typically |
| Specialist knowledge | Across multiple lender policies | Their own products only |
| If declined | Submits to alternative lender | You start again elsewhere |
| Ongoing reviews | Annual rate and loan reviews | Rarely proactive |
One of the most common questions we receive is about how brokers earn their income. Transparency around this is important, and since the Banking Royal Commission, broker remuneration has been reformed to better align broker and customer interests.
Upfront commission: When your loan settles, the lender pays the broker a one-off commission. This is typically around 0.6-0.7% of the loan amount (including GST). On a $500,000 loan, this equates to approximately $3,000-$3,500. Importantly, the commission rate is the same regardless of which lender you choose, so the broker has no financial incentive to recommend one lender over another.
Trail commission: The lender pays an ongoing trail commission of approximately 0.15-0.20% of the outstanding loan balance per year for as long as the loan remains with that lender. This incentivises the broker to provide ongoing service and keep you happy. If you refinance elsewhere, the trail stops.
Crucially, the broker’s commission does not come out of your pocket. It’s paid by the lender as a cost of acquiring business. The interest rate you receive through a broker is the same (or often better) than what you’d get walking into the bank directly.
Pro Tip: Under the Best Interests Duty (introduced in January 2021), brokers are legally required to act in your best interests when recommending a loan. This is a higher legal standard than what applies to bank staff, who are only required to provide products that are “not unsuitable.” This duty provides important consumer protection.
Myth: Brokers are more expensive. Brokers are free to use. The commission is paid by the lender, and the rate you receive is typically the same or better than going direct. In fact, a broker’s ability to compare across lenders often results in a lower rate than what a single bank would offer.
Myth: Banks offer exclusive deals not available through brokers. While some banks occasionally offer “direct-only” specials, brokers have access to their own exclusive rates and products not available to walk-in customers. In our experience, broker-exclusive rates are competitive with or better than direct offers in the vast majority of cases.
Myth: Brokers just push the lender that pays them the most. Since 2018, commissions have been standardised. Brokers receive the same percentage regardless of which lender they recommend. Combined with the Best Interests Duty, there is no financial incentive to recommend one lender over another based on commission.
Myth: It’s faster to go direct to a bank. Brokers submit applications that are complete and compliant with the lender’s requirements, which often results in faster processing. Applications submitted directly by consumers frequently have missing documents or errors that cause delays.
While we believe brokers offer the best outcome for most borrowers, there are situations where going directly to a bank can make sense. If you have a long-standing relationship with a bank and they’re offering competitive pricing to retain your business, a direct approach may work. Some banks offer loyalty pricing or relationship discounts for customers who hold multiple products (transaction accounts, savings, credit cards, insurance).
However, even in these situations, we’d recommend getting a broker quote first. Having a competitive offer from a broker gives you leverage to negotiate with your existing bank. If the bank can match or beat the broker’s offer, you have the option to stay. If they can’t, you have a better option ready to go.
Real Client Example
A couple from Armstrong Creek had been with their major bank for 15 years and assumed they’d get the best deal by staying loyal. They were paying 6.89% on a $480,000 variable loan. When they came to us for a comparison, we found three lenders offering rates below 6.15%, a saving of 0.74%. On their loan, that translates to roughly $3,550 per year or almost $300 per month. They refinanced within four weeks and are now saving significantly while also benefiting from better loan features including a fee-free offset account.
Not all brokers are created equal. Here’s what to look for when choosing a broker:
Qualifications and experience: Ensure your broker holds a current Australian Credit Licence or is an authorised credit representative. Look for additional qualifications such as a Diploma or Advanced Diploma of Finance and Mortgage Broking Management. Experience matters, particularly for complex scenarios like self-employed lending, SMSF finance, or commercial property.
Lender panel size: A broader panel means more options. Some brokers work with as few as 10-15 lenders, while others have panels of 40-60+. A larger panel doesn’t automatically mean better outcomes, but it does increase the likelihood of finding the right product for unusual situations.
Reviews and referrals: Check Google Reviews, ask for referrals from friends and family, and look for testimonials from clients in similar situations to yours. A broker with consistently positive reviews and strong word-of-mouth referrals is usually delivering real value.
Communication style: Your broker should explain things in plain language, respond promptly to questions, and keep you informed throughout the process. If you feel rushed, confused, or like your questions aren’t being answered, it’s a red flag.
Specialist knowledge: If you have a specific need (investment property, self-employed income, first home buyer grants, commercial finance), look for a broker with demonstrated expertise in that area. Generalist brokers may not have the depth of knowledge needed for complex scenarios.
One of the most expensive financial habits in Australia is what’s known as the “loyalty tax”, where long-standing customers pay higher interest rates than new customers at the same bank. Research from the ACCC and RBA has consistently shown that existing borrowers pay an average of 0.30-0.50% more than new customers at the same institution.
On a $500,000 loan, a 0.40% rate premium costs approximately $2,000 per year or $60,000 over the life of a 30-year loan. Many borrowers don’t realise they’re paying more because they haven’t compared their rate against current market offerings. Banks rely on inertia: the assumption that switching is too difficult or time-consuming.
A broker can quickly benchmark your current rate against the market and tell you whether refinancing would save you money. If your rate is competitive, great: you have peace of mind. If it’s not, you have a clear path to saving thousands. Either way, a 15-minute conversation could be one of the best financial decisions you make this year.
While a generalist broker can handle simple applications, certain situations benefit enormously from specialist expertise:
Self-employed borrowers: Banks assess self-employed income differently from PAYG income. Some lenders use the last two years’ tax returns, others use one year, and some offer low-doc options. A specialist broker knows which lenders are most favourable for your specific business structure: sole trader, partnership, company, or trust.
Property investors: Investment lending has specific requirements around rental income assessment, negative gearing calculations, interest-only periods, and cross-collateralisation. A broker experienced in investment lending can structure your portfolio for maximum efficiency and avoid common mistakes that limit future borrowing capacity.
Commercial and business finance: Business lending is vastly different from residential. Lenders assess business financials, cash flow, industry risk, and security differently. A broker with commercial expertise can work through these differences and find solutions that a residential-focused broker or bank manager might miss.
Credit-impaired borrowers: If you have defaults, judgments, or other credit issues on your file, mainstream lenders may decline your application. A specialist broker knows which non-conforming lenders consider credit-impaired applications and what terms are available, helping you access finance while you repair your credit history.
Real Client Example
A self-employed tradesman from Lara was knocked back by two major banks because his taxable income (after deductions) was too low to meet their serviceability requirements. His actual business cash flow was strong, but the tax returns didn’t reflect this. We submitted his application to a lender that uses a more nuanced approach to assessing self-employed income, factoring in depreciation add-backs and business cash flow rather than just taxable income. He was approved within 10 days and settled on his first home six weeks later. Without specialist broker knowledge, he would still be renting.
Do mortgage brokers charge a fee?
The vast majority of mortgage brokers in Australia do not charge fees to borrowers for standard residential lending. The broker is paid by the lender through upfront and trail commissions. Some brokers may charge fees for complex commercial or non-standard loans, but this should always be disclosed upfront.
Can a broker get me a better rate than the bank?
In many cases, yes. Brokers have access to broker-exclusive rates, can compare across dozens of lenders to find the most competitive option, and have negotiating leverage because they control where they direct business. Even if the rate is the same, the ability to compare features, fees, and policies across multiple lenders often results in a better overall outcome.
What is the Best Interests Duty?
The Best Interests Duty is a legal obligation introduced in January 2021 requiring mortgage brokers to act in the best interests of their clients when recommending loan products. This means the broker must prioritise your interests above their own or the lender’s, consider a range of products, and recommend the option that best meets your stated needs and objectives.
How long does the loan process take through a broker?
The timeline is similar to going direct, typically 2-6 weeks from application to settlement depending on the lender and complexity. Many brokers find that their familiarity with lender requirements actually speeds up the process, as applications are submitted complete and error-free from the start.
Can I use a broker and still bank with my preferred bank?
Absolutely. If your preferred bank offers the best deal for your situation, a broker can submit your application to that bank. The advantage is that the broker ensures you’re getting the best possible rate and terms from that bank, and you have the peace of mind knowing it was compared against other options first.
Our experienced brokers compare options across 60+ lenders to find the right solution for your situation.
Director & Senior Finance Broker
With years of experience in mortgage broking and finance, Melanie helps clients across Geelong, the Surf Coast, Melbourne and regional Victoria navigate the complexities of home loans and business finance. Contact our team on 03 9020 2699.
