How mortgage brokers get paid in Australia
Recent industry figures published by the Mortgage & Finance Association of Australia suggest that a large majority of new residential home loans in Australia are now arranged through a mortgage broker rather than by a borrower walking into a bank branch directly. Despite that, plenty of people who use a broker are not entirely sure how the broker is actually paid, and the honest answer surprises some of them: in the ordinary case, the borrower pays the broker nothing directly. The broker is instead paid by the lender, once the loan settles, through a commission arrangement.
That commission generally comes in two parts. The first is an upfront commission, a one-off payment made by the lender to the broker's aggregator (a business that provides brokers with access to lender panels, compliance support and payment processing) shortly after a loan settles, commonly some weeks later rather than immediately. It is calculated as a percentage of the amount actually drawn down, and industry figures widely cited for a typical upfront commission sit somewhere in the region of half of one percent to two-thirds of one percent of the loan amount — though the exact figure varies by lender and by broker arrangement, and precise current rates are best confirmed through a broker's own written disclosure rather than a general figure like this one.
The second part is trail commission, a smaller ongoing payment calculated on the loan's outstanding balance and paid to the broker, typically monthly, for as long as the loan remains open with that lender. Commonly cited trail rates sit in the region of a tenth to a fifth of one percent per year of the outstanding balance. Trail commission is one reason a broker's relationship with a client does not necessarily end at settlement — it continues, at least in a small financial sense, for as long as the loan does. If the loan is refinanced, paid out, or switched to a different lender, trail commission on that loan stops.
A related concept worth understanding is clawback. If a loan is discharged or refinanced within a relatively short period after settlement — commonly discussed as somewhere in the first one to two years — the lender has not yet earned enough interest on the loan to cover what it paid the broker upfront, and many lender agreements allow the lender to reclaim some or all of that upfront commission from the broker. Clawback terms differ from lender to lender and have shifted over time; some major lenders reduced the size and duration of clawback in recent years, but the details sit in each lender's own agreement with brokers rather than a single industry-wide rule.
None of this means a broker is paid by the borrower in disguise. Brokers are required to disclose their commission arrangements, generally through a written credit quote or similar disclosure document provided before a loan is recommended, and a borrower is entitled to ask for that information directly. It is also the reason Australia has a specific legal obligation, the Best Interests Duty, requiring a broker to prioritise the borrower's interests over their own commission — covered in more detail in a separate article.
This article is general information, not financial or credit advice, and no part of it should be read as an estimate of what any specific loan would cost, what a particular broker would be paid, or what commission arrangement applies to any individual case. Our directory lists Australian mortgage and finance brokers by area if you are comparing your own options.
Frequently asked questions
In the ordinary case, no — the broker is paid a commission by the lender once the loan settles, not a fee from the borrower. Some brokers may charge a fee in specific circumstances, such as complex commercial lending, so it is reasonable to ask directly whether any fee applies before proceeding.
Upfront commission is a one-off payment made by the lender to the broker shortly after a loan settles, calculated on the amount drawn down. Trail commission is a smaller ongoing payment calculated on the outstanding loan balance, typically paid monthly for as long as the loan remains open with that lender.
Clawback is a lender's right to reclaim some or all of the upfront commission it paid a broker if the loan is discharged or refinanced within a relatively short period after settlement, commonly discussed as the first one to two years. Terms vary by lender and have changed over time.
Yes. Brokers are required to disclose their commission arrangements, generally through a written credit quote or similar disclosure document, and you can ask for this information directly if it has not already been given to you.