Mortgage Broker vs Bank: A detailed analysis for Australian home buyers and refinancers

When seeking a home loan in Australia, one of the key decisions borrowers face is choosing between applying directly with a bank or engaging a mortgage broker. This choice can significantly impact loan costs, flexibility, customer experience, and ultimately, financial outcomes. This article offers a detailed, practical analysis tailored to the Australian context, helping borrowers understand the differences, benefits, and considerations of each option - with insights to guide you, including how mortgage brokerage services like Bheja.ai can help you to get the best of both options.

The Australian home loan market is characterised by a dominant role played by mortgage brokers. As of early 2024, mortgage brokers arranged approximately 75% of all new residential home loans, a significant rise from 57% in 2017. This trend reflects brokers' growing influence in connecting borrowers with a variety of lenders, including banks and non-bank lenders.

Banks remain the primary lenders, providing the bulk of home loan funding, but brokers act as intermediaries who can access a wide lender panel, offering borrowers greater choice beyond any single bank's product range. Medium-sized banks, in particular, rely heavily on brokers for new mortgage originations, with over 80% of their loans sourced through brokers, whereas major banks maintain a mix of direct and broker-originated loans.

• Mortgage Brokers are licensed credit intermediaries who assess borrowers’ needs and financial situations, then source and recommend suitable home loan products from multiple lenders. Brokers provide advice, manage paperwork, and often assist with loan application and refinancing processes. They receive commissions from lenders but are legally required to act in the best interests of borrowers.
• Banks are financial institutions that provide home loans directly to customers. Borrowers applying directly with banks engage with the bank’s own lending products and processes. Banks manage loan approval, servicing, and customer relationships internally, typically offering fewer product options compared to brokers’ lender panels.

Interest rates are a primary concern for borrowers. Data suggests interest rates on loans arranged through mortgage brokers and those applied for directly at banks are lender-dependent rather than channel-dependent. Brokers can provide competitive rates because they have access to multiple lenders and sometimes negotiate better offers or find niche loan products.

However, mortgage pricing in Australia suffers from a lack of transparency, complicating direct comparisons. Banks use discretionary pricing mechanisms that are not always clear to borrowers, which can obscure the true competitiveness of their rates compared to broker-arranged loans.

Reserve Bank data indicates that average new owner-occupier loan rates were around 5.83% per annum in early 2025, with some recent declines following cash rate cuts. Brokers often help borrowers access these competitive rates, and their market share growth suggests borrowers trust brokers to deliver favourable pricing.

In summary, brokers generally offer competitive interest rates relative to direct bank applications, but the advantage varies depending on the lender and market conditions.

Mortgage brokers typically earn commissions from lenders, including upfront and trail commissions, which are paid by the lender and not directly by the borrower. These commissions usually range from 0.05% to 0.15% annually on the loan balance. Despite this, loans arranged through brokers have been found to offer, on average, a 0.25% larger discount compared to direct bank loans, potentially offsetting commission costs.

Banks generally charge fees such as application, establishment, and ongoing account-keeping fees. Competition has driven many banks to reduce these fees or offer cashback incentives, especially to attract refinancing customers.

Regulatory reforms post-2017 have increased brokers' compliance costs and transparency obligations, which could influence fee structures and borrower costs.

Refinancing is an important consideration for existing homeowners seeking better rates or loan features. Brokers excel in this area by accessing a broader range of lenders, including non-bank lenders funded through securitisation. This wider access often results in more competitive refinancing options than those offered directly by banks.

While banks have responded to recent cash rate increases by offering competitive retention rates, the overall competition for refinancing has softened, giving brokers an edge in finding better offers for borrowers.

Brokers' commissions are generally outweighed by the savings borrowers achieve through better rates secured via their services, making broker-assisted refinancing cost-effective for many Australians.

First home buyers benefit significantly from using mortgage brokers. Brokers provide access to a wide panel of lenders, increasing the chance of securing competitive interest rates and loan features tailored to their financial situation. In fact, first home buyers using brokers have obtained interest rate reductions averaging 0.35% compared to direct bank applications.

Mortgage brokers are also required to act in the best interests of their clients, offering personalised advice and education about the home loan process. They spend about 11% of their time educating customers, which is invaluable for first home buyers new to the market.

Brokers arrange approximately 75% of new Australian residential loans, with 45% of their owner-occupier clients being first home buyers, indicating their specialisation in this segment.

Mortgage brokers may charge brokerage fees, but these are increasingly transparent and often tax-deductible. Banks typically do not charge broker fees but may levy application and ongoing fees.

Despite potential broker fees, brokers have been shown to save borrowers an average of $2,976 annually by securing better interest rates and loan terms. Given rising mortgage costs - owner-occupier average loan size reached $624,000 with interest rate increases of 125 basis points in 2023—these savings significantly improve affordability.

Mortgage brokers' access to non-bank lenders and a wide lender panel gives borrowers more refinancing choices, including options not available directly from banks. Non-bank lenders often have alternative funding structures, such as securitisation, allowing brokers to present competitive, tailored refinancing options.

This broader access is crucial in a market where banks may prioritise existing customers and limit new refinancing offers. Brokers thus play a vital role in helping homeowners reduce mortgage stress through better refinancing deals.

Online mortgage broker platforms have become critical tools for borrowers. Reviews indicate brokers have leveraged digital channels effectively, contributing to their rising market share of 71.7% in late 2022 and to 76.8% as MFAA report.

These platforms often feature user-friendly interfaces, competitive loan offers with cashback incentives, and tools for comparing loan products, enhancing borrower convenience and transparency. However, regulatory scrutiny underscores the need for secure, compliant digital environments, which is reflected in consumer trust and satisfaction.

Processing times and approval rates vary between brokers and banks. Brokers help reduce borrower confusion around mortgage products, aiding smoother applications. However, broker platforms sometimes face challenges with communication, technology reliability, and processing speed.

Banks benefit from regulated, secure digital portals and the introduction of government-backed digital identity frameworks, which enhance application efficiency and approval reliability.

Recent surveys show borrower satisfaction with brokers' application processes has declined, highlighting the need for brokers to improve digital infrastructure and communication.

Overall, banks may have an edge in processing speed and approval certainty, but brokers offer valuable advisory support and access to a wider lender panel.

Mortgage brokers' market share has steadily increased, now facilitating about 75% of new home loans, especially for small and medium-sized banks.

This shift enhances competition, lowers borrowing costs, and extends lender choice to consumers.

Mortgage brokers in Australia must comply with ASIC's Regulatory Guide 273, which mandates acting in consumers' best interests and fully disclosing fees, commissions, and any conflicts of interest.

Since 2021, brokers cannot rely solely on consumer consent to disclosures; they must ensure transparency and clear communication about remuneration they receive from lenders.

Most brokers do not charge direct fees to consumers, instead earning commissions from lenders, but disclosure of these commissions is compulsory to maintain consumer trust and regulatory compliance.

Consumers who believe brokers or banks have breached their obligations can seek recourse through the Australian Financial Complaints Authority (AFCA), which handles disputes related to fee disclosure and best interests duty breaches.

ASIC enforces compliance through investigations and penalties, exemplified by significant fines imposed on firms for misleading conduct and inadequate fee disclosure.

Consumer protections are further supported by the National Credit Act and Australian Consumer Law, providing avenues for legal remedies in cases of mis-selling or unconscionable conduct.

These protections ensure that consumers can confidently navigate the mortgage market with mechanisms to address grievances.

• If you value choice and tailored loan features: Consider a mortgage broker, who can access multiple lenders, negotiate rates, and advise on flexible repayment options.
• If you prefer direct control and existing banking relationships: Applying directly with a bank may offer convenience, but be aware of potentially less competitive rates and fewer product options.
• For first home buyers or complex borrowing needs: Brokers often provide critical guidance, access to government schemes, and education, improving loan suitability and satisfaction.
• Consider costs holistically: While broker commissions are embedded in loan pricing, their ability to secure lower interest rates may outweigh costs. Always request full disclosure of fees and commissions.
• Use technology-enabled brokers: Platforms like Bheja.ai enhance broker efficiency and transparency, improving client engagement and loan outcomes.

• Regulatory reforms will continue to enhance transparency, accountability, and consumer protection in mortgage broking.
• Technology adoption, especially AI-driven tools, will further streamline broker operations and improve borrower experiences.
• Brokers are expected to maintain or grow their market share, especially as competition among lenders intensifies and borrowers seek personalised solutions.
• Direct bank lending will remain relevant for customers prioritising established relationships but face competitive pressure from broker-facilitated lending.

For first home buyers and refinancers seeking comprehensive market access, expert guidance, and cost-effective solutions, using a reputable mortgage broker—such as services offered by Bheja.ai—can be a prudent choice. Bheja.ai’s brokerage services combine digital convenience with personalised advice, helping borrowers secure optimal home loans in a transparent, compliant manner.