Who pays the broker, how upfront and trail are structured, what clawback means, and why the model is designed so the borrower does not pay a fee in most residential transactions.
Mortgage broker commission is one of the most frequently misunderstood parts of the Australian lending market — by borrowers and, occasionally, by brokers explaining it. This is a plain description of how the money moves.
The lender pays, not the borrower
In a standard residential transaction the lender pays the broker's commission out of its own margin. The borrower does not receive a separate invoice, and the loan is not priced higher because a broker was involved — lenders publish the same rate card regardless of channel. Some brokers charge a fee for complex, commercial or specialist scenarios, and that fee must be disclosed in writing before the application proceeds.
Two payments, two purposes
- Upfront commission — a one-off payment at settlement, calculated on the net loan amount, compensating the work of preparing and submitting the application
- Trail commission — a monthly payment across the life of the loan, calculated on the outstanding balance, compensating ongoing service to the borrower
The trail component exists deliberately. It gives the broker a financial reason to stay engaged with the borrower after settlement rather than moving straight to the next transaction, and it is why regulators retained trail after reviewing broker remuneration.
Clawback
If a loan is discharged shortly after settlement, the lender reclaims some or all of the upfront commission from the broker. The window is commonly two years, usually on a sliding scale. Clawback is the mechanism that discourages churning loans for repeat upfront payments — but it also means brokers carry genuine financial risk on early refinances they did not cause and often did not know were coming.
What brokers actually earn
Headline commission rates are not take-home income. The aggregator takes a share, and the broker meets software, professional indemnity, association membership, marketing, compliance and staffing costs from what remains. Deloitte's 2025 report for the MFAA found average monthly settlement value per broker rose 42% between 2018 and 2024 to about $1.4 million, but the same report describes an industry made up overwhelmingly of small businesses carrying real fixed costs.
Why the structure matters to borrowers
Since 2021, brokers have operated under a Best Interests Duty — a legal obligation to act in the client's best interests that does not apply to bank staff selling their own products. Combined with the shift to calculating upfront on the net-of-offset amount, the remuneration model is now structured to reduce the incentive to write larger loans than a borrower needs.
Brokers now arrange roughly 75% of new residential home loans in Australia, and 72% of broker business comes from repeat clients and referrals — which is a market verdict on whether the model works for borrowers.
Source: Deloitte Access Economics, The Value of Mortgage and Finance Broking 2025, prepared for the MFAA. Commission rates vary by lender and aggregator; figures described here are indicative.