How trail commission is calculated, what a trail book is actually worth, and the retention behaviours that decide whether that income compounds or quietly erodes.
Trail commission is the recurring payment a lender makes to a broker for the life of a loan they originated. It is the closest thing broking has to recurring revenue, and for most established practices it is the difference between an income that resets every January and a business with an enterprise value. This guide covers how trail is calculated, how to value a book, and where that value leaks.
Upfront and trail commission: how each is paid
Australian residential lending uses a two-part structure. Upfront commission is a one-off payment made on settlement, calculated on the loan amount — typically net of any offset balance, following the reforms that came out of the Combined Industry Forum. Trail commission is paid monthly thereafter, calculated as an annualised percentage of the outstanding loan balance.
- Upfront: commonly quoted in the region of 0.6%–0.7% of the net loan amount, paid once at settlement
- Trail: commonly quoted in the region of 0.15%–0.20% per annum of the outstanding balance, paid monthly
- Rates vary by lender, aggregator agreement and product, and some lenders use a tiered trail that steps up with loan age
- Your aggregator takes a share before the payment reaches you, depending on your split or flat-fee arrangement
Treat those percentages as indicative ranges rather than fixed figures. Your own aggregator commission schedule is the only authoritative source for your business.
How to calculate monthly trail on a single loan
The arithmetic is simple: multiply the outstanding balance by the annual trail rate, then divide by twelve. A $600,000 loan on a 0.15% trail generates $900 a year, or $75 a month, before your aggregator split. The same loan at 0.20% generates $1,200 a year, or $100 a month.
Two things make real-world trail lower than the naive calculation. The balance amortises, so the payment shrinks each month as principal is repaid. And offset balances reduce the calculation base with most lenders. A book modelled on settlement balances will always overstate the income it actually produces.
Valuing a trail book
Trail books are bought and sold, and the market prices them on a multiple of annualised recurring trail income. Buyers discount for the characteristics that predict runoff, so two books producing identical monthly income can be worth materially different amounts.
- Annualised trail income — the monthly payment across the whole book, multiplied by twelve
- Runoff rate — the percentage of the book that discharges, refinances away or pays down each year
- Book age profile — loans past their honeymoon or fixed period are closer to a refinance decision
- Lender concentration — a book weighted to one lender carries that lender's repricing behaviour as a risk
- Client relationship depth — whether the borrower would come back to you, or start with a comparison site
Runoff is the variable most brokers under-measure and buyers scrutinise most closely. A book losing 20% a year and a book losing 10% a year have very different net present values even at the same starting income, because the difference compounds across every future year.
"Trail income is not passive. It is the financial record of relationships that are still intact."
Where trail income leaks
Attrition is rarely a single dramatic event. It is a slow sequence: a fixed rate rolls off without a conversation, the borrower notices a comparison-site ad, they call the retention line at their existing bank, and the loan is repriced or refinanced by someone else. The trail either drops or disappears, and the broker often learns about it from a commission statement weeks later.
Deloitte's 2025 report for the MFAA found brokers who conduct proactive rate reviews secured repricing outcomes averaging around 0.35% better for clients. The same behaviour that produces a better client outcome is the behaviour that keeps the loan on your book — the interests genuinely align here.
Clawback: the other side of the ledger
Clawback applies to upfront commission, not trail. If a loan discharges inside the lender's clawback window — commonly two years, often on a sliding scale where a discharge in year one attracts a higher repayment than year two — the lender reclaims some or all of the upfront. Early attrition therefore costs a broker twice: the upfront is returned, and the trail stream never materialises.
Protecting the book in practice
- Track fixed-rate expiry and interest-only expiry dates across the whole book, not just active files
- Monitor the gap between each client's current rate and the lender's live new-customer pricing
- Contact clients before the trigger event, not after the repricing letter arrives
- Keep a written record of each review — Best Interests Duty compliance and retention are the same workflow
- Measure annual runoff as a number, so you can tell whether retention effort is working
The compounding argument
Every loan retained pays trail for years, while every new loan requires new acquisition cost. Deloitte reports that 72% of broker business now comes from repeat clients and referrals, which means the book is also the primary lead source. Protecting trail and generating new business are not competing priorities — they are the same activity viewed over different timeframes.
Kayotte monitors an existing loan book for repricing opportunities, expiry triggers and refinance risk, and turns them into a prioritised list of clients to contact this week. If you want to see it against your own book, book a walkthrough.
Commission figures in this guide are indicative industry ranges; confirm your own rates against your aggregator's commission schedule. Industry statistics: Deloitte Access Economics, The Value of Mortgage and Finance Broking 2025, prepared for the MFAA.