What is the average mortgage broker commission rate?

When you set out to purchase a house, a mortgage broker can help you understand your home loan options, based on the interest rates and terms offered by different lenders. But how much does a mortgage broker really cost?

Mortgage broker commission rates

Most mortgage brokers are paid a commission by lenders, so you usually don’t need to pay a thing for the services they provide. The commission is paid by lenders for the mortgage broker connecting them with new customers. 

Some lenders pay broker commissions at a fixed rate regardless of what they recommend to property buyers, while others may pay more for brokers who offer certain loans. However, in some cases, a mortgage broker may charge the buyer a fee rather than taking a lender’s commission.

How much commission does a mortgage broker make?

The mortgage broker commission structure paid by lenders usually includes an upfront commission and a trail commission.

An upfront commission is where the lender pays the mortgage broker a commission to introduce its home loans to home buyers.

A trail commission is a deferred payment, paid by a lender to a broker every month over the life of the loan, as long as the borrower keeps up with their repayments.  

According to Blue Fox Finance, the average mortgage broker commission rates are:

• Upfront Commission: 0.65% - 0.70% of the loan amount + GST in most cases.
• Trail Commission: 0.15% of the loan balance each year.

Can you trust broker recommendations?

Given that lenders are predominantly paying brokers commissions for their services, you may be nervous about whether you can truly trust the recommendations of a broker. Luckily, there are strict regulations in place designed to protect home loan borrowers from being pushed towards unsuitable loans.

All mortgage brokers in Australia need to either hold an Australian Credit License (ACL) or be an Authorised Credit Representative (ACR) of a license holder. Under these licences, mortgage brokers are required by law to disclose the commissions they may receive for recommending different loan options to you.

Further, brokers are also obliged to act in your best interest when you’re looking for a home loan. In 2021, Best Interests Duty laws came into effect for mortgage brokers and financial advisers. Best Interests Duty enforces that mortgage brokers cannot just recommend the loan that pays the biggest commission, but must act in the best interest of a client when providing financial advice.

And remember, if you’re concerned about a broker’s commissions, don’t be afraid to ask!

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