How do mortgage brokers get paid for their service in Australia?
In Australia, mortgage brokers are typically paid in two main ways: upfront commission and trail commission, which are paid by the lender rather than the borrower.
Upfront Commission
Trail Commission
1. Upfront Commission
This is a one-time payment the broker receives when the loan is settled.
It is usually a percentage of the total loan amount, typically between 0.50% and 0.70% of the loan value (excluding GST).
For example, on a $500,000 loan, a broker with a 0.60% commission rate would receive $3,000.
2. Trail Commission
This is an ongoing commission paid monthly or annually as long as the loan remains active.
It typically ranges from 0.10% to 0.30% per year of the remaining loan balance.
For example, if the loan balance is $400,000 and the trail commission is 0.15%, the broker would receive $600 per year (before GST).
If the loan is refinanced or paid off early, the trail commission stops.
Other Potential Fees
While brokers primarily earn through lender commissions, some may charge a broker fee (paid by the borrower) for very complex loan applications, but this would for extremely complex cases.
Regulations & Transparency
Brokers must disclose their commissions to clients under the National Consumer Credit Protection Act (NCCP).
Since 2020, Best Interests Duty (BID) laws have required brokers to act in the borrower’s best interest, reducing the risk of lenders influencing recommendations based on commissions. Mortgage brokers must act in the best interests of consumers when providing credit assistance. Where there is a conflict of interest, mortgage brokers must prioritise the interests of consumers.
Conflict Priority Rule (CPR): If there is a conflict of interest while providing credit assistance to consumers, Mortgage Brokers must act in the client's best interest to ensure that the client is offering the best possible mortgage option for their circumstances. Under no circumstances should a Broker prioritize their interests or the interests of credit providers or any third parties involved in the process. At Best Foot Forward Mortgage Solutions, we are client-focused, ethical and committed to providing the best possible service to our clients.
Brokers must follow industry laws and codes of practice to maintain their Industry Memberships, Agrigator Memberships and Australian Credit Licences with ASIC.
If you’d like to learn more about our terms and service and our obligations to our clients, click here.