Most people get their first home loan from their existing bank. It's the path of least resistance: you already have an account there, you trust the brand, and the branch is nearby. But is it actually the best option? And what does a mortgage broker do differently?
Here's an honest breakdown of how each works, where the value lies, and the three questions you should ask any broker before you hire them.
What a Mortgage Broker Does
A mortgage broker is an intermediary who has lending agreements (called "accreditations") with a panel of lenders, typically anywhere from 20 to 60+ lenders depending on the broker's aggregator. Their job is to:
1. Assess your financial situation and borrowing capacity 2. Research which lenders and products are appropriate for your circumstances 3. Prepare and lodge your application 4. Manage the process through to settlement 5. Be your point of contact if issues arise with the lender
A broker doesn't work for any one bank. They work for you, and under law they are required to do so.
Cost to you as the borrower: nothing. Brokers are paid a commission by the lender whose product you settle on. This is called an upfront commission (paid at settlement, typically 0.65% of the loan amount) and a trail commission (a small ongoing fee paid monthly for the life of the loan, typically 0.15–0.2%). You never see these amounts deducted: they are paid by the lender from their own margin.
What a Bank Does
When you walk into a bank branch or use their online application, you're dealing with a product manufacturer. They have one panel of products (their own) and their job is to find you the right product within that range. They cannot tell you that a competitor offers a better rate or a more suitable structure. They're not obligated to.
Bank staff are generally salaried employees. Some receive bonuses or incentives based on loan volumes. Their expertise can vary significantly. A branch loan officer is not always a trained credit specialist.
Why Brokers Often Find Better Rates
Banks have multiple pricing tiers. The rate advertised on their website, or quoted at the branch, is often not the lowest rate available from that lender. Brokers who write significant volumes through a lender's aggregator relationship often have access to aggregator-level pricing that is not available to customers who apply directly.
This means a broker may be able to secure you a rate from the same bank that is lower than what you'd be quoted if you walked in yourself. This isn't always the case, but it's common enough that comparing is always worth doing.
Beyond pricing, a broker's value lies in matching the right product to your situation. This includes features (offset accounts, redraw, flexible repayments), lender policies (which lender treats your income type most favourably), and the lender's assessment appetite (not all lenders will approve the same application).
The Conflict of Interest Question
Here's the honest part: because brokers are paid more commission for larger loans and may receive higher commissions from certain lenders, there's a theoretical conflict of interest. This has not been ignored by regulators.
Since January 2021, all mortgage brokers in Australia have been legally required to operate under a Best Interests Duty. This means:
- A broker must act in the customer's best interests when providing credit assistance
This regulation brought Australian mortgage broking into alignment with financial advice standards. It doesn't eliminate the theoretical conflict, but it creates legal accountability for any broker who ignores it.
In practice, the best brokers have always operated this way. The regulation now ensures that those who don't face genuine consequences.
When You Might Go Direct to Your Bank
There are scenarios where going direct makes sense:
You have a very simple situation. If you're an owner-occupied buyer with a large deposit, a long stable employment history, and no complexity in your income, most lenders will approve you easily. The difference between the most competitive and least competitive mainstream lender might be small enough that the convenience of your existing bank wins.
You have a genuine relationship with a private banker. Some lenders offer private banking services for high-value clients that include personalised service, discretionary pricing, and faster turnaround. If you genuinely have this relationship, it can be worth using it.
You want to keep everything under one roof. Some borrowers prefer the simplicity of having their transaction accounts, savings, and home loan with one institution. This is a personal preference, not a financial one, but it's valid.
You want to negotiate directly. Borrowers who are confident negotiators and have strong financials can sometimes get competitive outcomes by approaching a lender directly, particularly for refinances. This works best when you already have competing quotes in hand.
Are There Any Fees to Use a Broker?
For the vast majority of home loans, no fees are charged to the borrower. The broker is paid by the lender.
A small number of specialist scenarios may involve a broker fee — for example, very complex commercial applications, or some non-conforming loans where the lender's commission doesn't fully cover the work involved. In these cases, a reputable broker will disclose the fee clearly and upfront, and explain why it applies.
Any broker who charges you an upfront fee for a standard residential home loan without a clear explanation should be questioned. Ask what it covers and why it applies.
FBAA and MFAA Membership: Why It Matters
Australia's two main mortgage broking associations are the Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA). Membership in either requires:
When you're choosing a broker, check that they are a member of one of these associations. It's a baseline quality signal. You can verify membership on the FBAA and MFAA websites.
Brokers are also required to hold an Australian Credit Licence (ACL) or be a credit representative under a licensee's ACL. This is the regulatory baseline: without it, they cannot legally provide credit assistance.
The 3 Questions to Ask Any Broker Before You Hire Them
1. How many lenders are you accredited with? A broker with 10 lenders on their panel offers meaningfully less choice than one with 40. More lenders means a better chance of finding the right fit for your specific situation. Ask for their lender panel in writing.
2. Do you receive the same commission from all lenders, or higher commissions from some? Commissions across lenders are generally similar (this is partly a result of the Best Interests Duty framework) but some lenders do offer volume bonuses or additional incentives. Ask directly. A broker who can answer this question clearly and honestly is showing you something important about how they operate.
3. What happens after settlement: are you still involved? A good broker doesn't disappear after your loan settles. They should review your rate annually, contact you if a significantly better rate becomes available, and be available if your circumstances change. Ask about their post-settlement process. Trail commission only makes sense for a broker if they intend to maintain the relationship.
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Going to your bank is not wrong. But understanding what a broker can offer, and asking the right questions, means you make an informed choice rather than a default one. In most cases, the comparison takes less than an hour and costs you nothing.
Want to see what's available to you across the market? Book a free, no-obligation consultation with Tom Smith at Kookaburra Finance, Springfield Central. We're MFAA members, accredited with 40+ lenders, and there's no fee to you.