Mortgage Broker

What Does a Mortgage Broker Do?

A mortgage broker is a licensed finance professional who acts as an intermediary between borrowers and lenders. Rather than working for a single bank, a mortgage broker has access to a panel of lenders — often 50 or more — including major banks, credit unions, building societies, and specialist non-bank lenders. Their role is to assess your financial situation, understand your goals, and recommend the home loan product that best suits your needs from across the entire market.

In Australia, mortgage brokers now arrange over 70% of all residential home loans. This shift has occurred because borrowers increasingly recognise the value of having an expert who can navigate the complex lending landscape on their behalf. A good mortgage broker does far more than simply find a low interest rate — they consider loan features, lender policies, approval timeframes, and your long-term financial strategy to recommend the right overall solution.

The mortgage broker handles the entire application process. This includes collecting your financial documents, preparing and packaging your application, submitting it to the chosen lender, liaising with the lender's credit team, coordinating with solicitors and conveyancers, and ensuring settlement proceeds smoothly. For most borrowers, working with a broker significantly reduces the time and stress involved in securing a home loan.

How Do Mortgage Brokers Get Paid?

Understanding how mortgage brokers earn their income is important for transparency and trust. Mortgage brokers in Australia are paid by the lender, not by the borrower. There are two components to broker remuneration: an upfront commission and an ongoing trail commission.

The upfront commission is paid when your loan settles and is typically between 0.5% and 0.7% of the loan amount (including GST). For example, on a $500,000 loan, the upfront commission would be approximately $2,500 to $3,500. This commission compensates the broker for the work involved in comparing lenders, preparing your application, and managing the approval process.

The trail commission is an ongoing payment made monthly by the lender to the broker for the life of the loan. Trail commission is typically around 0.15% to 0.20% per annum of the outstanding loan balance. This ongoing payment incentivises brokers to provide continued service after settlement — including annual rate reviews, refinance assessments, and ongoing support with your lending needs.

Critically, these commissions are paid by the lender from their own margin and do not increase the interest rate or fees you pay. The rate you receive through a broker is the same as — or often better than — the rate you would receive by walking into a bank branch directly.

Mortgage Broker vs Bank: Pros and Cons

Choosing between a mortgage broker and going directly to a bank is one of the first decisions borrowers face. Both options have advantages, and understanding the differences helps you make an informed choice.

A mortgage broker offers access to a wide range of lenders, meaning they can compare dozens of products to find the one best suited to your circumstances. This is particularly valuable if you have a complex financial situation — such as being self-employed, having multiple income sources, holding existing investment properties, or having a less-than-perfect credit history. Different lenders have different credit policies, and a broker knows which lender is most likely to approve your application and offer the best terms.

Going directly to a bank can be simpler if you already have a strong banking relationship and are confident you are getting a competitive rate. However, a bank can only offer you their own products. They cannot tell you whether a competitor is offering a better rate, more suitable features, or a higher borrowing capacity for your specific situation. Banks also do not have a legal obligation to act in your best interests — while brokers do, under the Best Interest Duty.

The main advantages of using a broker include: access to 50+ lenders from one point of contact, free service at no cost to you, time savings (one application covers multiple lenders), expert knowledge of lender policies and credit appetites, negotiation leverage with lenders, and ongoing support including annual rate reviews. The primary consideration is that some lenders — such as certain neobanks — may not be on a broker's panel, though the vast majority of Australian lenders distribute through the broker channel.

How to Choose a Mortgage Broker

Not all mortgage brokers are the same, and choosing the right one can make a significant difference to your experience and outcome. Here are the key factors to consider when selecting a mortgage broker in Australia.

First, verify their credentials. All mortgage brokers in Australia must hold an Australian Credit Licence or be an authorised Credit Representative of a licence holder, as required by the National Consumer Credit Protection Act 2009 (NCCP Act). You can verify a broker's registration on the ASIC Credit Representative Register. Membership of an industry body such as the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA) is also a positive indicator of professionalism and ongoing education.

Second, consider the size of their lender panel. A broker with access to 30+ lenders can offer you a genuinely competitive comparison. Ask which lenders are on their panel and whether they include both major banks and specialist non-bank lenders. Some brokers have limited panels or are tied to specific aggregation groups, which can restrict the options available to you.

Third, look at their reviews and reputation. Online reviews, referrals from friends or family, and industry awards can provide insight into the quality of service a broker provides. Pay attention to reviews that mention communication, responsiveness, and the broker's willingness to explain the process clearly.

Questions to Ask Your Mortgage Broker

When meeting with a mortgage broker for the first time, asking the right questions helps you assess their suitability and ensure you are in good hands. Here are the most important questions to ask.

A good broker will answer these questions openly and without hesitation. Transparency is a hallmark of a trustworthy professional. If a broker is evasive about their commission structure or the size of their lender panel, consider looking elsewhere.

The Mortgage Application Process

The mortgage application process can seem daunting, but a good mortgage broker simplifies it considerably. Understanding the stages helps you prepare and know what to expect at each point.

The process begins with an initial consultation where your broker gathers information about your financial position, goals, and preferences. They will review your income, expenses, assets, liabilities, and credit history. Based on this assessment, they will recommend suitable lenders and products, explaining the interest rate, features, fees, and total cost of each option.

Once you choose a product, your broker prepares and submits a formal application to the lender. The lender then conducts their own credit assessment, verifies your documents, and orders a property valuation if applicable. During this period, your broker is your point of contact — they follow up with the lender, address any queries, and keep you informed of progress. Upon approval, the lender issues a formal offer, which you review and sign. Your broker coordinates with solicitors, conveyancers, and the lender to arrange settlement.

How Mortgage Brokers Compare Lenders

One of the most valuable services a mortgage broker provides is a structured comparison of lenders. This goes far beyond simply comparing interest rates — a comprehensive comparison considers a wide range of factors that affect the suitability and total cost of a home loan.

Brokers use professional software and aggregator tools to compare products side by side. They assess the advertised rate, comparison rate (which includes standard fees), ongoing fees, upfront fees, offset account availability, redraw facilities, extra repayment flexibility, fixed rate break costs, loan portability, and approval timeframes. They also factor in lender-specific policies that affect approval — such as how each lender treats overtime income, rental income, HECS debt, credit card limits, and self-employed income.

This depth of analysis is something individual borrowers rarely have the tools or knowledge to perform themselves. A broker's experience across hundreds of applications gives them insights into which lenders are performing well in terms of approval turnaround, valuation accuracy, and service quality — factors that are invisible to the market but critically important during an often time-sensitive property purchase.

ASIC Regulation and the NCCP Act

Mortgage brokers in Australia operate within a robust regulatory framework designed to protect consumers. The primary legislation governing mortgage brokers is the National Consumer Credit Protection Act 2009 (NCCP Act), which is administered by the Australian Securities and Investments Commission (ASIC).

Under the NCCP Act, all mortgage brokers must either hold an Australian Credit Licence or be authorised as a Credit Representative of a licence holder. To obtain and maintain a licence, brokers must meet minimum education requirements (Certificate IV in Finance and Mortgage Broking or equivalent), complete annual Continuing Professional Development (CPD), hold professional indemnity insurance, be a member of an ASIC-approved external dispute resolution scheme (AFCA), and comply with responsible lending obligations.

Responsible lending obligations require brokers to make reasonable inquiries about a borrower's financial situation, take reasonable steps to verify the information provided, and make a preliminary assessment that the credit product is not unsuitable for the borrower. These obligations ensure that borrowers are not placed in loans they cannot afford and that the lending process is conducted with integrity and professionalism.

Best Interest Duty Obligations

Since 1 January 2021, Australian mortgage brokers have been subject to a Best Interest Duty under the NCCP Act. This landmark reform requires brokers to act in the best interests of their clients when providing credit assistance. The duty has three core components.

First, the best interests obligation requires brokers to act in the best interests of the consumer in relation to the credit assistance they provide. This means recommending the loan product that genuinely suits the borrower's needs, not the product that pays the highest commission. Second, the conflict priority rule requires that, where a conflict of interest arises, the broker must give priority to the consumer's interests. Third, a broker must not receive conflicted remuneration — meaning any payment or benefit that could reasonably be expected to influence the broker's recommendation.

The Best Interest Duty is a significant consumer protection that distinguishes mortgage brokers from bank employees. Bank staff are not subject to this duty — they are incentivised to sell their employer's products. This legal obligation provides borrowers with confidence that their broker's recommendation is genuinely tailored to their situation and financial wellbeing.

Why Using a Mortgage Broker Is Free for Borrowers

One of the most common questions borrowers ask is how a mortgage broker can offer a free service. The answer lies in the business model: lenders pay brokers a commission when a loan is settled because brokers bring them qualified borrowers. This distribution cost is built into the lender's business model — the same way advertising and branch costs are — and does not result in a higher rate for broker-originated loans.

In fact, some lenders offer marginally better rates through the broker channel because the cost of acquiring a customer through a broker is lower than maintaining a branch network. The ACCC's Home Loan Price Inquiry confirmed that broker customers generally receive equivalent or better pricing compared to those who approach lenders directly. This makes using a mortgage broker a genuinely no-cost proposition for Australian borrowers — you gain access to expert advice, a wide lender panel, and full application management without paying a cent from your own pocket.