Mortgage broker vs bank: which actually costs less?

A broker is generally paid by the lender rather than by you. There is an upfront commission when the loan settles, and in most cases a smaller trail commission for as long as the loan stays open and in good standing. The amount is disclosed in your loan documents, so you can read exactly what was paid on your file.

Trail matters more than people assume, because it aligns the broker with the loan surviving. A broker paid only on settlement has every reason to move you constantly. A broker paid trail has a reason to put you somewhere that still suits you in three years.

Some complex commercial or specialist files do carry a fee for service. That should be disclosed in writing before any work begins, never discovered at settlement.

It is the right question to ask. Two things constrain it in Australia. The first is Best Interests Duty, which legally obliges mortgage brokers to act in the borrower's best interests, not the lender's and not their own. A bank employee selling that bank's products is not under the same duty.

The second is disclosure. You can see the commission arrangement in your documents, and you are entitled to ask a broker directly which lenders pay them more and why they recommended the one they did. A broker who cannot answer that clearly is telling you something.

Commission rates across major lenders are also compressed enough that the difference on a given loan is rarely large enough to justify placing a client badly, especially against the trail and reputational cost of a loan that fails.

Not usually on the headline rate for a straightforward file. A salaried professional with a 30% deposit and clean credit will be competitively priced almost anywhere, and the honest answer is that a broker saves that person time rather than money.

The difference shows up when policy, not price, is the binding constraint. Approval is decided by whether a lender's credit policy fits your circumstances, and policies differ far more than rates do.

A bank can make exceptions on its own book. Where you have a long relationship, significant deposits or a private banking arrangement, an in-house lender can sometimes get a discretionary discount or a policy exception that a third party cannot request.

Going direct is also simply faster if you already know the product you want, you fit the policy cleanly and you are not trying to compare anything.

The two approaches are not exclusive. Getting a broker assessment and then asking your own bank to match what it produced is a reasonable strategy, and a good broker will not be offended by it.

A short list separates a broker who is comparing the market from one who is placing you with a habitual favourite.