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

If you’re looking for a home loan in Australia, you’ll need to decide whether to work with a mortgage broker or go straight to a bank. This guide explains the main benefits and drawbacks of each option. The right choice depends on your situation, goals, and the kind of support you want during the process.

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In this guide, we’ll break down the key differences between mortgage brokers and banks in Australia, including how their services work, who they suit best, and what costs, benefits, and challenges you should consider when applying for a home loan. By the end, you’ll have a clearer understanding of the best way to get a home loan for your needs.

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 diverse range of lenders, including banks and non-bank financial institutions. If you’re looking to compare home loans in Australia, understanding the advantages of using a mortgage broker is essential.

Banks remain the primary lenders, providing the bulk of home loan funding, but brokers act as intermediaries who can access a wide range of lenders, 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 in Australia are licensed credit intermediaries who assess borrowers’ needs and financial situations, then source and recommend suitable home loan products from multiple lenders. A home loan broker can provide advice, manage paperwork, and often assist with loan applications and refinancing processes. They receive commissions from lenders but are legally required to act in the best interests of borrowers under regulations set by the Australian Securities and Investments Commission (ASIC). You can verify a mortgage broker’s credentials through ASIC’s professional registers or by contacting industry associations such as the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia Limited (FBAA).
• 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 comparing home loans in Australia. Data suggests interest rates on loans arranged through mortgage brokers and those applied for directly at banks are lender-dependent rather than channel-dependent. Mortgage 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 often employ discretionary pricing mechanisms that are not always transparent to borrowers, which can obscure the true competitiveness of their rates compared to those of broker-arranged loans.

Reserve Bank data indicate 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 trailing 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 a mortgage broker in Australia have been found to offer, on average, a 0.25% larger discount compared to direct bank loans, potentially offsetting the costs of commissions.

Banks generally charge fees, including 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 implemented after 2017 have increased brokers' compliance costs and transparency obligations, which may impact fee structures and borrower costs.

Refinancing is a crucial consideration for existing homeowners seeking more favorable rates or loan terms. 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 in Australia. Brokers provide access to a wide range of lenders, increasing the likelihood of securing competitive interest rates and loan features tailored to their individual financial situation. In fact, first home buyers using mortgage 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, as mandated by ASIC’s regulations. This “best interests duty” ensures that brokers recommend options that are most suitable for your needs, not simply those that offer them the highest commission. In addition to providing personalised advice and education about the home loan process, they spend approximately 11% of their time educating customers, which is invaluable for first-time 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 the rising mortgage costs—the average loan size for owner-occupiers 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 range of lender options 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 play a vital role in helping homeowners reduce mortgage stress by offering better refinancing deals.

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

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 the reliability of approval.

Recent surveys indicate that borrower satisfaction with brokers' application processes has declined, underscoring the need for brokers to enhance their digital infrastructure and communication.

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

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 expands lender options for consumers.

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

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

Most brokers do not charge direct fees to consumers; instead, they earn commissions from lenders. However, disclosure of these commissions is compulsory to maintain consumer trust and ensure 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 breaches of the best interests duty.

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 in place to address grievances.

• If you want more choice and loan features that fit your needs, a mortgage broker can help by working with different lenders, negotiating rates, and offering advice on flexible repayments.
• If you like having direct control and already have a good relationship with your bank, applying with them might be more convenient. Just keep in mind you might not get the best rates or as many options.
• First-time buyers or people with complex needs often find brokers helpful. Brokers can guide you, explain government schemes, and help you find a loan that fits your situation.
• Think about all the costs involved. Broker commissions are usually included in the loan, but the savings from lower interest rates can be worth it. Always ask for a clear breakdown of any fees or commissions.
• Consider using brokers who use technology, like Bheja.ai. These platforms make the process smoother, more transparent, and can help you get better results.

• Regulatory reforms will continue to enhance transparency, accountability, and consumer protection in the mortgage broking sector.
• The adoption of technology, particularly AI-driven tools, will further streamline broker operations and enhance 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 it faces competitive pressure from broker-facilitated lending.

If you’re a first home buyer or looking to refinance, a good mortgage broker like Bheja.ai can give you access to more options, expert advice, and cost-effective solutions. Their services combine digital convenience with personal support, helping you find the right home loan.