Mortgage Broker vs Bank: What the Reddit Threads Miss

For most first home buyers and anyone whose situation isn't perfectly vanilla, a broker wins. They compare more lenders, they know which lender's policy fits your specific circumstances, and they're legally required to act in your best interests. Going direct to a bank makes sense when you already know the exact product you want, or when that bank is running a direct-only deal.

Here's the part the Reddit threads usually skip: brokers and bank staff operate under different legal obligations, and that difference is the strongest argument in the whole debate.

The legal difference nobody mentions

Since 1 January 2021, mortgage brokers in Australia have been subject to a Best Interests Duty under the National Consumer Credit Protection Act. They're legally obliged to act in the borrower's best interests and to prioritise the borrower's interests over their own if the two conflict.

Bank lending staff are not. A bank employee sells that bank's products. That isn't a scandal, it's just what they are, and it's the reason "I'll go straight to my bank because they know me" isn't the safety argument people think it is.

Brokers now write the clear majority of new residential home loans in Australia, roughly three quarters according to industry figures from the MFAA. That share has been climbing for years. Check the current figure if it matters to your decision, since it's updated quarterly.

Broker versus bank, side by side

How brokers actually get paid

This is the question the Reddit threads circle and rarely answer properly.

The lender pays the broker, not you. There are two components:

• Upfront commission at settlement, commonly quoted around 0.65% of the loan amount, though it varies by lender
• Trail commission each year the loan stays open, commonly quoted around 0.15% to 0.20% of the outstanding balance

Those percentages are widely quoted ranges rather than fixed rates. The number that matters is the one in your broker's Credit Guide, which they're required to give you and which must disclose how they're paid and by whom. Read it. If a broker is cagey about it, that's your answer.

Clawback, the thing to ask about

If you refinance or sell within roughly two years, the lender claws back some or all of the upfront commission from the broker. Some brokers pass that cost on to you through a fee in their agreement, and some don't.

Ask directly: "If I refinance in 18 months, do you charge me anything?" Get the answer before you sign, not after.

Where the commission concern is real, and where it isn't

The reasonable version of the concern: commission rates differ slightly between lenders, so there's a theoretical incentive to steer. The Best Interests Duty exists precisely because regulators took that seriously.

The unreasonable version: assuming every broker is corrupt. The differences between lender commission rates are small, and the reputational and regulatory cost of steering a client badly is large.

What actually protects you is asking for the comparison in writing. A broker who shows you five lenders, the rates, the fees and why they recommended one of them is doing the job. A broker who shows you one lender and a signature line isn't.

When going direct to the bank is the better move

• You already have a strong relationship and a package deal that discounts your rate across products.
• The bank is running a direct-only offer, like a cashback or a rate that isn't available through the broker channel.
• You want a lender that doesn't use brokers at all. A handful of direct-only online lenders sit outside every broker panel.
• Your situation is completely straightforward, you've done the comparison yourself, and you just need an application channel.
• You're simply topping up or restructuring an existing loan with the same lender.

When a broker is clearly worth it

• Self-employed, or income from contracting, bonuses, overtime or commission
• Casual employment, or recently changed jobs
• Using the First Home Guarantee or another government scheme, where lender participation and process differ
• Your borrowing capacity is marginal, and the gap between the most and least generous lender can be six figures
• Credit file issues, past defaults, or a complicated financial history
• Buying with a guarantor, or an unusual structure
• You don't have the time to research and apply to multiple lenders yourself

The single biggest practical benefit is lender policy knowledge. Two lenders with almost identical advertised rates can differ by more than $100,000 in what they'll lend the same applicant, because of how they treat overtime, HECS, casual income or credit card limits. Finding that out yourself means applying repeatedly and collecting credit enquiries.

Nine questions to ask a broker

1. How many lenders are on your panel?
2. How many did you actually compare for me, and can I see it in writing?
3. Which lender gave the highest borrowing capacity, and which gave the lowest rate? Are they the same one?
4. How are you paid on this loan, and does it differ between the lenders you showed me?
5. Do you charge a clawback fee if I refinance or sell within two years?
6. Are you a member of the MFAA or FBAA?
7. Who is your external dispute resolution scheme? It should be AFCA.
8. What are the fees on this loan, including annual package fees and discharge fees?
9. What happens after settlement? Do you review the rate, and how often?

Red flags: pressure to sign quickly, refusal to show a comparison, vagueness about commission, or a recommendation to a single lender with no alternatives presented.

Do the numbers yourself first either way

Walk into either conversation knowing your own figures. It changes the discussion completely.

• Borrowing Capacity Calculator for a starting estimate of what you can borrow
• Mortgage Repayment Calculator for what the repayments look like
• LMI Calculator if your deposit is under 20%
• Stamp Duty Calculator for the upfront cost people forget
• Can I Afford to Buy Calculator for the whole affordability picture
• Refinance Calculator if you already have a loan and you're comparing

Related reading

• Mortgage Broker vs Bank
• Best Mortgage Broker for First Home Buyers
• How to Increase Your Borrowing Capacity
• First Home Guarantee: Buying With a 5% Deposit

Frequently asked questions

Is a mortgage broker better than going to a bank?

For most first home buyers and anyone without a completely straightforward situation, yes. Brokers compare 20 to 40 lenders, know how each lender's policy treats your income and debts, and have been subject to a Best Interests Duty since 1 January 2021. Bank staff sell only that bank's products and have no equivalent duty.

How much does a mortgage broker cost?

Usually nothing to you. The lender pays the broker an upfront commission at settlement, commonly quoted around 0.65% of the loan, plus a trail commission of roughly 0.15% to 0.20% a year. Your broker's Credit Guide must disclose exactly how they are paid, so read it.

What is broker clawback and does it cost me?

If you refinance or sell within about two years, the lender claws back commission from the broker. Some brokers pass that cost on through a fee in their agreement and some do not. Ask directly whether you will be charged if you refinance within 18 months, before you sign.

When should I go directly to a bank instead?

When you already have a package deal that discounts your rate, when the bank is running a direct-only cashback or rate, when you want a lender that does not use brokers at all, or when your situation is simple and you have already done the comparison yourself.

Do brokers push you to lenders that pay them more?

The Best Interests Duty exists because regulators took that risk seriously, and commission differences between lenders are small. Protect yourself by asking for the comparison in writing. A broker who shows you five lenders with rates, fees and reasoning is doing the job. One who presents a single option is not.