Mortgage broker fees: who pays in Australia?

Who actually pays the broker

For most Australian residential home loans the borrower pays the broker nothing directly. The lender pays the broker, and it does so in two parts: an upfront commission once the loan settles, and a smaller ongoing payment called trail for as long as the loan stays open and in order. That arrangement is why a broker can usually say there is no cost to you for a standard purchase or refinance.

It also means the commission is not an extra charge bolted onto your loan. It is paid out of the lender's own margin under a distribution agreement between the lender and the broker's aggregator, so the same product generally carries the same rate and fees whether you arrange it through a broker or walk into a branch. Where a lender does price its broker channel and direct channel differently, that is a lender pricing decision, and it can favour either channel depending on the lender and the campaign running at the time.

None of that makes the arrangement invisible, and it should not be. Before a broker gives you credit assistance they must hand you a Credit Guide, and before you proceed they must give you a document disclosing the commission they expect to receive on the loan being proposed. Read both. If you have not been offered either, ask.

Upfront commission: how it is worked out

Upfront commission is calculated as a percentage of the loan amount and paid shortly after settlement. Across the Australian market it typically sits somewhere around 0.55% to 0.75% of the loan, before the aggregator's share is deducted, though the exact rate is set in each lender agreement and varies between lenders and aggregators.

Two details matter more than the headline percentage. First, most lenders now calculate upfront on the amount actually drawn down, net of any money sitting in an offset account at the time of measurement — a Royal Commission-era change that stopped brokers being paid on funds you never used. Second, commission is paid on the loan size, which is worth knowing because it is the one structural incentive in the model: a bigger loan pays more. The counterweights are the best interests duty and the fact that a loan you cannot service will not be approved, but you are entitled to ask directly whether the amount being recommended is what you need or simply what you could get.

Trail commission: what the ongoing payment is for

Trail is a smaller annual payment, commonly in the range of 0.15% to 0.275% of the outstanding balance, paid monthly for the life of the loan. Because it is calculated on the balance, it falls as you pay the loan down and stops entirely when the loan is discharged.

The Royal Commission examined whether trail should be abolished and the government ultimately kept it, on the reasoning that it pays for something real: a broker who still earns from a loan five years after settlement has a reason to answer the phone when your fixed rate expires, when a repayment jumps, or when you want your rate repriced. It also blunts the incentive to refinance you repeatedly, since churning a client interrupts the trail. Trail is not a guarantee of good service, but a broker who never contacts you again is leaving money on the table, and you are entitled to use that. Ask what ongoing review you should expect and how often.

When a borrower does pay a fee

Borrower-paid fees are the exception in residential broking, but they are legitimate and they do happen. The usual cases are files where the lender commission does not cover the work: commercial and business lending, self-managed super fund lending, complex company or trust structures, specialist and non-bank files that need extensive packaging, small loan amounts where a percentage of the loan is not viable, and situations where the loan does not proceed after substantial work has been done.

The rule is simple and it is not negotiable: any fee payable by you must be disclosed and agreed in writing before the work starts, not mentioned once you are committed. If a fee is quoted, ask what it covers, whether it is refundable if the loan is declined, and whether it is payable in addition to or instead of lender commission. Where a fee applies you can negotiate it, exactly as you would with any other professional service. What you should not accept is a request for a large payment before the scope is defined in writing.

Clawback: the part that catches borrowers out

If a loan is discharged or refinanced within a set period after settlement, the lender takes back some or all of the upfront commission it paid. That is clawback. The window is commonly up to 24 months, often at 100% in the first year and a reduced proportion in the second, and it is set by the lender, not the broker.

This matters to you for two reasons. It explains why a broker may push back on refinancing a loan they arranged only months ago, and it is why some brokers include a clause allowing them to charge you a fee if you discharge inside the clawback window. That clause is lawful if it was disclosed and agreed up front, so read for it before you sign. If you know there is a realistic chance you will sell or refinance quickly — a short-term hold, a property going to market, a fixed rate you intend to break — say so at the start. It changes which lender is sensible, and it avoids an argument later.

The best interests duty and what it obliges

Since 1 January 2021, mortgage brokers arranging consumer credit secured by residential property have been subject to a statutory best interests duty under Part 3-5A of the National Consumer Credit Protection Act 2009, with ASIC's expectations set out in Regulatory Guide 273. The duty requires the broker to act in your interests, and where a conflict exists between your interests and theirs, to give yours priority. It sits on top of the responsible lending obligations that require the credit contract to be not unsuitable for you.

Alongside the duty, the post-Royal Commission reforms banned conflicted remuneration in this channel: volume-based bonuses, soft-dollar benefits such as lender-funded travel, and campaign incentives tied to writing business with a particular lender. The practical effect is that a broker cannot lawfully be paid more for steering you to one lender over another in the ways that used to exist. Commission rates still differ modestly between lenders, which is why the duty and the disclosure documents matter, and why it is entirely reasonable to ask why a particular lender was recommended over the next-best option.

Broker or straight to the bank?

A bank lends its own product and assesses you against its own policy. If you fit that policy cleanly and you are happy with the pricing, going direct is a perfectly sound choice, and no one should tell you otherwise. What a bank cannot do is tell you that a different lender would accept your income evidence, your credit history, or the property you are buying.

That difference is most of the value. Lender policy varies far more than lender pricing: how a self-employed applicant's income is calculated, whether a HELP debt is excluded, how much rental income is shaded, whether a small apartment or a rural block is acceptable security, how a tax debt or a past default is treated. A broker who works across a panel is choosing the assessor as much as the rate. Where the file is straightforward, the honest answer is that the advantage narrows to convenience and comparison rather than approval.

What to ask before you proceed

Ask which credit licensee and credit representative number the broker operates under, and verify it on ASIC Connect. Ask how many lenders are on their panel and how many they actually used in the last year. Ask which lenders were considered for your file and why the recommended one won. Ask what commission they will receive on this loan, and whether it differs from the next lender on the shortlist.

Then ask the questions that decide whether you are being looked after after settlement: what happens at fixed-rate expiry, whether they run an annual rate review, whether they will approach your lender for repricing before proposing a refinance, and whether any fee becomes payable if you discharge early. A broker who answers all of that in writing without hesitation is telling you something useful. So is one who does not.

What Australian borrowers usually miss

The commission model is not the thing most likely to cost you money. Paying a legacy rate while the same lender advertises a sharper one to new customers usually costs far more per year than any difference in how a broker is paid, and a term quietly reset to 30 years on refinance can cost more again over the life of the loan. If you want one number to check, check your own rate against your lender's current new-customer pricing.

Disclosure documents are also routinely skimmed. The Credit Guide and the credit proposal disclosure exist so you can see the commission and the conflicts in writing, and reading them takes a few minutes. If a complaint arises later, the licensee must have an internal dispute process, and you can escalate free of charge to the Australian Financial Complaints Authority.

Next step with a broker

Azure Home Loans is a credit representative and is paid by the lender on standard residential home loans, with any borrower fee disclosed and agreed in writing before work begins. Guides on this site are general information for Australian readers, not personal credit advice, and approval is never guaranteed.

If you want your own file reviewed — including what commission applies and why a particular lender is being recommended — send an enquiry or call before you change loans, fix a rate, or rely on a single advertised figure.