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What Does a Mortgage Broker Actually Do? A Buyer's Guide (2026)
Brokers now arrange four in five new home loans. Here's what a mortgage broker does, who really pays them, and when one is actually worth it.
A mortgage broker is the person who arranges your home loan for you: they sit between you and the lenders, compare loans, and manage the paperwork through to settlement. Not a stockbroker, who trades shares. Not the bank, whose staff can only offer that one bank’s products. A different job, on your side of the table.
In the June 2026 quarter, mortgage brokers facilitated a record 81.6% of Australia’s new home loans, up from 53.9% in the June 2018 quarter. The figures come from the industry body, the MFAA (Mortgage & Finance Association of Australia). Broker-originated lending is now the dominant way new home loans are arranged.
Which is exactly why it pays to understand two things you’ll hear about brokers: that they’re “free”, and that they’re “on your side”. Both are mostly true. Both carry a catch worth knowing before you sign anything. This guide walks through what a broker does, who really pays them, when one is worth it, and the downside worth weighing.
- A mortgage broker is a licensed go-between who compares home loans across a panel of lenders and manages your application to settlement. They are not a stockbroker, and not a lender.
- For most buyers there’s no direct fee, because the lender pays the broker a commission. That is the catch worth understanding; a separately quoted fee can still apply.
- Since 1 January 2021, brokers must act in your best interests by law. That is a floor, not a guarantee of the market’s lowest rate.
- A broker helps most when your situation is complicated or hard to compare. A simple, strong, salaried application may do just as well going direct to a lender.
- Broker-originated lending now dominates new home loans, so knowing how brokers are paid matters more than ever.
A mortgage broker, defined (and why it isn't a stockbroker)
A mortgage broker is a go-between who deals with banks and other lenders to arrange a home loan on your behalf. That’s the definition from MoneySmart, the Australian government’s money-guidance service, run by the regulator ASIC (the Australian Securities and Investments Commission). They compare loans across the lenders they work with, then help you apply. That’s the core of it.
Two quick distinctions clear up most of the confusion. A stockbroker buys and sells shares, and has nothing to do with home loans. A lender’s own staff, at a bank branch, can only offer that lender’s products. A mortgage broker is neither: an intermediary who can arrange your loan with any lender on their panel, meaning the set of lenders they are accredited to work with.
To operate, a broker must hold an Australian Credit Licence, or act as a representative of someone who does: a registered credit representative, or an employee or director of a licensee. That licensing is what makes them accountable to ASIC. A broker is not a financial adviser and does not give investment advice. knest.ai is not a broker either; we help you get your own position clear before you speak to one.
What does a mortgage broker actually do?
A mortgage broker does five things: they assess what you might borrow, compare loans across their lender panel, recommend one and explain why over the alternatives, lodge the application, and manage it through to settlement. Some also review your loan later. Their job, per ASIC’s MoneySmart, is to arrange the loan, not to lend the money themselves.
In practice it runs in that order. First, the broker looks at your income, deposit, debts and goals to gauge your borrowing position. Next, they compare loans across their panel and shortlist ones you may qualify for. Then they recommend a loan and talk you through the trade-offs on rate, fees and features.
Once you choose, the broker prepares and lodges the application with that lender, follows it through, and coordinates the paperwork up to settlement day. The lender, not the broker, makes the approval decision. A good one keeps you informed at each step, so you’re not guessing where the application sits.
The five steps a mortgage broker works through, from your first conversation to settlement day. Source: ASIC MoneySmart.
Where a broker earns real trust is in the second step. The value isn’t the paperwork; it’s knowing which lenders suit your situation before you apply. That’s tied up in how they’re paid, which is worth its own look: here’s how mortgage brokers actually get paid.
How do mortgage brokers get paid, and is it free to you?
For most buyers, a broker costs nothing directly, because the lender pays them a commission for arranging the loan, per ASIC’s MoneySmart. Lenders generally pay the broker rather than you, so you don’t pay them out of pocket. That’s why brokers are usually described as free to the borrower.
The commission comes in two parts. There’s an upfront payment when the loan settles, and an ongoing “trail” commission for as long as the loan runs, a structure ASIC set out in its 2017 review of mortgage broker remuneration (Report 516). The upfront is a percentage of the amount you borrow; the trail is generally a percentage of what you still owe, so it shrinks as you pay the loan down. The exact rates vary by lender, so ask your broker what upfront and trail would apply to your loan.
Two caveats keep “free” honest. First, a broker may still charge you a direct fee in some cases, and if they do, it has to be disclosed to you in writing. Second, since 1 January 2021, brokers have been legally required to act in your best interests (ASIC, Regulatory Guide 273). That duty is real, but it’s a floor: it doesn’t guarantee you the lowest rate on the market.
Is it free, then? Usually, yes. Is it free of any incentive? No. Understanding what the lender is paying for is the difference between accepting a recommendation and judging it. The detail sits in what a broker actually costs you.
Broker or your own bank: which is right for you?
The core trade-off is simple: a broker compares lenders across their panel for you, while your own bank offers only its own products. Brokers now facilitate 81.6% of new home loans (MFAA, June 2026 quarter), so the panel route dominates, but going direct isn’t wrong, and for some it’s the cleaner path.
A broker’s advantage is range. They can point you toward the lenders most likely to suit your situation, which matters if your income or deposit is anything but standard. They know how a lender sizes up your borrowing power and weigh that across a whole panel, not just the one bank you’d see going direct.
Going direct has its own logic. If you already bank somewhere you trust and your finances are straightforward, one relationship can be simpler, and a lender will sometimes sharpen its offer to keep you. It’s worth remembering a 2020 finding from the competition regulator, the ACCC. It found many borrowers with older loans were paying higher average rates than borrowers with newer ones, a gap it called a loyalty tax (ACCC, Home Loan Price Inquiry, 2020). Loyalty rarely earns you the best rate by itself.
The choice isn’t expert versus no expert. It’s a panel-based comparison plus application support, set against dealing directly with one lender, and either way you still weigh the final loan’s rate, fees and fit. There’s no universal answer, only a fit. The full comparison, including whether a broker is worth it for you, is here: broker vs going straight to your bank.
When a mortgage broker is worth it, and when it isn't
A broker tends to add more value as your situation gets more complicated, and less when it’s simple. Complexity is only one factor, though: how much you want to compare lenders yourself, the time you’ll spend, and how wide the broker’s panel is all matter too. If your income is steady and your file is clean, going direct is perfectly viable.
A broker isn’t a universal upgrade. Where they help most is where lender policies are hardest to compare. Here’s roughly how that maps:
| Your situation | What’s harder to compare here | What to ask the broker |
|---|---|---|
| Stable PAYG income, clean file, solid deposit | Often little — you can compare lenders directly | What comparison or application support are you actually adding? |
| Self-employed, casual, or multiple incomes | Which lenders accept your income type, and the evidence they want | Which lenders’ policies did you compare for my income? |
| Low deposit, or relying on a scheme | Which lenders participate, each lender’s credit policy, LMI and product rules | Which relevant lenders are on, and off, your panel? |
| A credit blemish, or a prior decline | Why it was declined, and who may assess it differently | What should I check before another application goes in? |
Broker share of new home loans climbed from 53.9% in June 2018 to 81.6% in June 2026 (MFAA). A rising share doesn’t tell you a broker got a better result for someone like you, so judge the fit for your own situation, not the trend.
Broker-arranged share of new residential home loans, June 2018 versus June 2026. Source: MFAA (Cotality).
What's the downside of using a mortgage broker?
The honest downsides are these: a broker’s panel isn’t the whole market, the pay structure can reward a bigger loan, and lodging multiple loan applications can stack enquiries on your credit file. A fourth worry, being billed for the broker’s clawback, the law actually rules out. None of this makes brokers a bad idea. It just means asking, up front, how many lenders they compared for you.
Start with the panel. A broker can only place your loan with lenders they’re accredited to, so an option off their panel won’t show up in that broker’s comparison, though you can still check elsewhere. It’s fair to ask how many lenders they work with, and how many they actually compared for you.
Then the incentive. Part of the broker’s pay is an ongoing trail, and a bigger loan means a bigger trail. The structure, then, can reward a larger loan. That’s a potential conflict worth understanding, not a claim about how any particular broker behaves, and the best-interests duty is meant to constrain it. Knowing the pull exists lets you weigh the recommendation rather than just take it.
Clawback, credit enquiries, and a myth to retire
Clawback sounds alarming but mostly isn’t your problem. Under the broker’s remuneration arrangement, the lender can recover the upfront commission from the broker (or their aggregator) if you repay or refinance early. By law it can’t run more than two years after the loan starts (National Consumer Credit Protection Regulations, reg 28VG), and the same rules stop anyone passing that clawback on to you. What a broker can do is charge a separate service fee, but only if it’s set out in a written quote you sign first (ASIC MoneySmart). Read the quote for any fee, and know the clawback itself won’t land on you as a bill. Your loan’s own exit costs, like a discharge or break fee, are separate.
Credit enquiries are the last one to watch. Each credit application is recorded as an enquiry on your credit report, and too many in a short time can lower your score (ASIC MoneySmart). Talking to a broker or getting a quote isn’t an application, so ask at what point a credit enquiry will actually be lodged before you agree to anything.
One myth to retire: trail commissions were not abolished. The 2019 Hayne royal commission recommended ending trail on new loans, but the government did not implement that ban (Royal Commission, Final Report, 2019), so trail remains standard. Treat the best-interests duty as a floor rather than a guarantee, and ask a broker directly whose interest a recommendation serves.
Choosing a good broker, and the questions to ask
Choosing well comes down to a few checks: confirm the broker is licensed, ask how wide their lender panel is, ask how they’re paid and whether any fee could fall to you, and ask why they’re recommending this loan over the alternatives they compared. The best-interests duty backs you here, but the questions still do the real work.
First, licensing. A broker must hold an Australian Credit Licence or work under someone who does, and that’s a fair thing to confirm up front. Next, panel breadth, because a broker who works with a handful of lenders is comparing a narrower field than one with dozens, though what actually got compared for you matters more than the raw number. Then the question of why this loan, over the others they looked at.
Before any of that, get your own numbers straight, so you can judge the answers instead of just receiving them. You can map your borrowing readiness before you see a broker with knest.ai, which means you walk in prepared rather than persuaded. The red flags to weigh, and the full interview list, live in how to choose a broker (and the red flags) and the questions to ask before you sign.
Do first-home buyers need a mortgage broker?
First-home buyers don’t strictly need a broker, but one can help them, because small deposits and government schemes are where lender policies vary a lot. A broker who knows which lenders support which schemes can cut a lot of guesswork. Going direct is still fine if your situation is straightforward. Scheme eligibility is set by the official rules, not the broker, so verify the current rules and which lenders take part.
It comes back to what’s hard to compare. If you’re combining a low deposit with a first-home scheme, matching your situation to a participating lender gets fiddly fast, and that’s where a broker’s panel knowledge helps. With a large deposit and simple income, you can more easily compare directly.
Whether you use a broker or not, get borrowing-ready first: here’s whether first-home buyers need a broker, and the groundwork to lay before you talk to anyone.
The bottom line for buyers
A mortgage broker compares home loans across a panel of lenders and steers your application to settlement, and for most buyers there’s no direct fee because the lender pays them. That arrangement is convenient and legitimate, and it carries an incentive you should understand rather than ignore.
The practical takeaways are short. Know how a broker is paid, because it can create incentives worth understanding. Weigh how hard your own situation is to compare, not just how popular brokers are. Ask about the licence, the panel and why they chose this loan. And get your own borrowing position clear first, so you can weigh what a broker tells you instead of taking it on faith.
Brokers now arrange a large majority of new home loans, but popularity doesn’t decide whether one is right for you. That call is still yours, and it’s easier to make once you know how they work.
Get your income, deposit and goals organised with knest.ai’s free AI assistant, and understand the factors a lender weighs, so you can take sharper questions to a licensed broker and judge the answers for your own circumstances.
Ask knest.aiFrequently asked questions
Can a mortgage broker arrange any loan on the market?
Not quite. A broker arranges loans only with lenders on their panel, meaning the ones they’re accredited with, so a cheaper or better-fitting option off that panel won’t show up in their comparison (ASIC MoneySmart). It’s fair to ask how many lenders they compare, and who’s on the panel.
Do mortgage brokers make money off you?
They’re paid by the lender, not usually by a fee from you. ASIC’s Report 516 describes the standard model: an upfront commission when the loan settles, plus an ongoing trail commission calculated on the balance you still owe, for as long as the loan runs. Both come from the lender, but the incentive is worth understanding.
Is it worth paying a mortgage broker?
Most buyers pay nothing directly, so the real question is whether a broker adds value for you. That depends on how hard your situation is to compare, how much you want to shop lenders yourself, and how wide the broker’s panel is. A simple, salaried application may do fine going direct; complex income, a low deposit or a past knock-back are where lender policies get harder to compare.
Are brokers required to act in my best interest?
Yes. Since 1 January 2021, mortgage brokers have been legally required to act in consumers’ best interests, under ASIC’s Regulatory Guide 273. That’s a genuine protection, but it’s a floor, not a promise of the lowest rate on the market, so it pays to stay informed.
Sources
- ASIC MoneySmart, “Using a mortgage broker”, retrieved 2026-09-11, https://moneysmart.gov.au/home-loans/using-a-mortgage-broker
- ASIC, Report 516 “Review of mortgage broker remuneration”, 16 March 2017, retrieved 2026-09-11, https://www.asic.gov.au/regulatory-resources/find-a-document/reports/rep-516-review-of-mortgage-broker-remuneration
- ASIC, Regulatory Guide 273 “Mortgage brokers: Best interests duty”, and media release 20-146MR (24 June 2020), retrieved 2026-09-11, https://www.asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-273-mortgage-brokers-best-interests-duty/
- MFAA (Mortgage & Finance Association of Australia), “Mortgage broker market share reaches record 81.6%”, September 2026 (data by Cotality, commissioned by the MFAA), retrieved 2026-09-11, https://www.mfaa.com.au/news/mortgage-broker-market-share-reaches-record-81-6
- Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Final Report (2019), Recommendation 1.3; non-implementation via Federal Register of Legislation F2020L01189, retrieved 2026-09-11, https://www.legislation.gov.au/Latest/F2020L01189
- ACCC, “Home Loan Price Inquiry — Final report”, 28 November 2020, retrieved 2026-09-11, https://www.accc.gov.au/focus-areas/inquiries-finalised/home-loan-price-inquiry/final-report
- Federal Register of Legislation, National Consumer Credit Protection Regulations 2010, reg 28VG “Clawback requirements” (current compilation), retrieved 2026-09-11, https://www.legislation.gov.au/F2010L00631/latest/text
- ASIC MoneySmart, “Loan rejection”, retrieved 2026-09-11, https://moneysmart.gov.au/loans/loan-rejection
- ASIC MoneySmart, “Credit scores and credit reports”, retrieved 2026-09-11, https://moneysmart.gov.au/managing-debt/credit-scores-and-credit-reports
Eleanor Hayes, Editor, knest.ai
This article is general information for Australian home buyers, not personal financial or credit advice. knest.ai is a buyer-focused property intelligence platform that provides decision support, not a broker or lender service, and does not replace a licensed mortgage broker or lender. Any broker introduction through the Home Loan Expert is buyer-initiated and never automatic. Where knest.ai receives a benefit from such an introduction, that benefit is disclosed to you. Verify any figures for your own circumstances before you act.
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