What does a mortgage broker actually do, and how do they get paid?

More than three in four new home loans in Australia are now arranged through a mortgage broker. According to the Mortgage & Finance Association of Australia, brokers wrote a record 77.6% of all new residential home loans in the June 2025 quarter, up more than 10 percentage points in just two years.

And yet, most people who've never used a broker have a vague sense of what they actually do. "They help you get a home loan, right?" is about as far as the understanding tends to go. More pointedly, people are often suspicious of the payment model: if the bank pays the broker, doesn't that create a conflict of interest?

These are fair questions. This article answers them honestly, including the parts that are worth being sceptical about.

What most people think brokers do vs what they actually do

The common assumption is that a broker is a middleman who submits your application to a bank and takes a cut. That's a bit like saying a surgeon cuts people open. Technically accurate but missing most of what's actually happening.

Here's what a broker actually does, from start to finish:

Understands your full financial picture. Before a broker recommends anything, they assess your income, employment type, existing debts, assets, spending patterns, credit history, short-term needs and long-term goals. The reason this matters: different lenders assess borrowers in very different ways. One lender might penalise you heavily for a recent job change; another might be completely comfortable with it. One might accept your self-employed income calculation; another might not. A broker who knows your situation can match you to lenders who will genuinely work for you, not just the lender with the best advertised rate.

Compares products across a panel of lenders. A mortgage broker works with a panel of lenders, typically anywhere from 20 to 40+ banks, credit unions, building societies and non-bank lenders. That's a catalogue of hundreds of loan products, each with different rates, features, fees, servicing criteria and flexibility. Doing that comparison yourself, across that many options, is practically a second job.

Negotiates on your behalf. Brokers don't just submit your details and hope for the best. They negotiate, pushing lenders for sharper rates, waiver of establishment fees, or cashback offers. A broker with strong volume relationships at a particular lender will often be able to get a client a better rate than the same client walking through the branch door alone.

Manages the entire application process. From gathering your documents and preparing the application, to coordinating with the lender's credit team, the real estate agent, the conveyancer, and the valuer. A broker handles the logistics that can otherwise consume a significant amount of your time. In a competitive property market, where a pre-approval needs to be in place quickly, this coordination is genuinely valuable.

Provides post-settlement service. A good broker doesn't disappear after your loan settles. Annual rate reviews, help restructuring loans as your circumstances change, access to extra funds for renovations, assistance when you're ready to invest. The ongoing relationship is a significant part of what you're actually getting.

How brokers get paid

Here's where full transparency matters. Brokers in Australia are paid by lenders, not directly by borrowers, in most cases. There are two components:

Upfront commission

When your loan settles, the lender pays the broker a one-off upfront commission. This is typically around 0.65% of the loan amount, though it ranges from roughly 0.5% to 0.7% depending on the lender.

On a $700,000 loan at 0.65%, that's $4,550, paid by the lender, not added to your loan.

One important detail: most lenders now calculate this commission on the loan balance net of offset. If you borrow $700,000 and immediately put $80,000 into an offset account, the broker's commission is calculated on $620,000, not the full $700,000. This prevents any incentive to encourage clients to borrow more than they need just to inflate the commission.

Trail commission

In addition to the upfront payment, the broker receives a small ongoing trail commission for as long as your loan remains active with that lender. Trail is typically around 0.15% per annum of the outstanding loan balance, paid monthly.

On that same $700,000 loan in year one, trail amounts to roughly $1,050 annually, or about $87 per month. As you pay down the loan, the trail reduces proportionally. If you refinance to a different lender, the trail stops immediately.

Trail exists to fund the ongoing service a broker provides: annual rate reviews, restructuring help, answering your questions when rates change. A broker who puts you in a loan you'll stick with for years earns more trail than one who churns clients through refinances. That alignment of incentives matters.

The clawback provision

If you refinance within the first two years of settlement, the lender typically requires the broker to return a portion of the upfront commission, sometimes all of it. The general industry structure is approximately 100% clawback within the first 12 months, reducing to around 50% between 12 and 24 months, and nothing after that.

This is worth knowing because it means brokers have a genuine financial disincentive to put you in the wrong loan. If they recommend a product that doesn't serve you and you refinance within a year, they repay their commission. Far from being a structure that incentivises bad behaviour, the clawback provision actively penalises it.

"But doesn't the commission mean the broker is biased toward certain lenders?"

This is the right question to ask, and it deserves a direct answer.

The honest answer is: commission rates across major lenders are broadly similar, which reduces the financial incentive to favour one over another. But commission rates are not identical. Some lenders pay marginally more than others, and that difference could theoretically influence a recommendation.

This is exactly why the Best Interests Duty (BID) was introduced in January 2021. Under this law, mortgage brokers are legally required to recommend products that are in your best interest, not the product that maximises their commission. It's not a guideline or an industry code. It's a legal obligation, enforced by ASIC.

In 2026, ASIC is conducting its first formal monitoring exercise specifically focused on BID compliance, the first direct regulatory audit of whether brokers are living up to this standard since it came into force. The obligation is real and actively scrutinised.

Does using a broker cost you more?

No, at least not in terms of your interest rate or loan costs.

Lenders factor broker distribution costs into their overall pricing model regardless of whether you come via a broker or walk through the front door. When you go directly to a bank branch, the bank still has a sales team, an operations team and a processing team to pay. The cost is distributed across all borrowers either way.

In practice, many borrowers find they get a better rate through a broker than going direct, because the broker has leverage via volume and can apply competitive pressure across multiple lenders simultaneously. The branch simply offers you its advertised rate. The broker negotiates.

What you're entitled to ask your broker

Brokers are legally required to disclose how they're being paid. Before you proceed with any loan application, your broker must provide you with a Credit Proposal that includes full commission details. You don't have to wait for that document. You can ask at any point:

• "How many lenders are on your panel, and which ones have you considered for my situation?"
• "What upfront and trail commission will you receive on this recommendation?"
• "Is there a lender not on your panel who might offer a better deal for someone in my position?"
• "Will you review my rate annually and contact me if I'm no longer competitive?"

A broker who answers these questions openly and without hesitation is exactly the kind of broker worth working with. One who deflects or gets defensive is worth being cautious about.

The bigger picture: why broker market share keeps growing

The fact that nearly four in five Australians now choose a broker to arrange their home loan isn't an accident. It reflects a gradual, earned shift in trust, driven partly by the Best Interests Duty, and partly by a straightforward value proposition.

Going directly to a bank means choosing from one lender's range of products, assessed by that lender's criteria, at the rate they decide to offer you. Using a broker means having access to dozens of lenders competing for your business, with someone whose job is to find you the best fit, and who is legally bound to act in your interest.

For most borrowers, most of the time, the choice is clear.

Where Home Loan Rate Check fits in

Before you engage a broker, or even know if you need one, the first question to answer is whether your current home loan rate is competitive. There's no point seeking help with a new loan structure if you're already sitting on a rate that could be significantly improved.

Home Loan Rate Check exists to answer that question quickly, clearly and without obligation. If your rate stacks up, great. You can make an informed decision from a position of confidence. If it doesn't, we can connect you with a broker who can get it right.