How Mortgage Brokers Influence Home Loan Rates: Should You Use One or Go Direct?

Securing the best home loan rate is one of the most important steps in the property buying process. Even a small difference in interest rates can mean tens of thousands of dollars saved over the life of a loan. One of the biggest decisions borrowers face is whether to work with a mortgage broker or approach lenders directly.

Brokers often promise better deals through negotiation, while direct lenders advertise sharp rates and cashback offers to win customers. But which option genuinely delivers the better financial outcome?

This article breaks down how mortgage brokers influence home loan rates, compares broker-negotiated deals with direct lender offers, and explains the hidden costs borrowers should watch for.

Mortgage Broker-Negotiated Rates vs Direct Lender Deals

Mortgage brokers act as intermediaries between borrowers and lenders, matching clients to loans that suit their financial profile. The appeal of using a broker is their access to a broad panel of lenders, including major banks, second-tier lenders, and non-bank providers.

Brokers can compare multiple loan products and often have access to exclusive rates or fee waivers that aren’t publicly advertised. Industry data shows brokers now arrange around 70% of all new home loans in Australia, underscoring their influence in the market.

But do brokers always secure the lowest rates?

Not necessarily. Direct lenders frequently run special promotions for new customers, offering lower rates or cashback incentives. Borrowers with strong credit scores, stable incomes, and substantial deposits may qualify for excellent rates directly without broker assistance.

Importantly, direct lenders don’t pay broker commissions, and some of that saving is passed back to the borrower—particularly through loyalty discounts offered to existing customers.

Pros and Cons of Using a Mortgage Broker

There’s no one-size-fits-all answer when deciding whether to use a mortgage broker. For some borrowers, brokers unlock significant savings and save time. For others, direct lender deals may be simpler and more cost-effective.

Pros of Using a Mortgage Broker

• Access to Multiple Lenders: Brokers can compare dozens of loan options, increasing the chance of securing a competitive rate.
• Time Savings: A broker handles paperwork, application submissions, and negotiations.
• Negotiation Power: Brokers may secure discounted rates or waive certain fees.
• Specialist Loans: Brokers often have access to lenders catering to self-employed borrowers or those with complex income.
• Ongoing Support: Brokers guide clients through the loan process, explaining terms and tailoring repayments to fit goals.

Cons of Using a Mortgage Broker

• Potential for Higher Costs: Some brokers may recommend loans with higher commissions rather than the lowest cost to the borrower.
• Limited Lender Pool: Not all banks work with brokers, meaning some competitive direct deals may be missed.
• Hidden Fees: While brokers are typically paid by lenders, some charge upfront broker fees to borrowers.
• Conflicts of Interest: Certain brokers prioritise lenders who offer better commissions, not necessarily better rates.
• Unnecessary Complexity: Brokers may recommend loan features that add cost without delivering meaningful benefit.

Hidden Commission Fees and Their Impact on Rates

A common misconception is that mortgage broker services are always free. In reality, brokers are paid by lenders through commissions, which can shape the recommendations they make.

The two main types of broker commissions are:

• Upfront Commission: A one-time payment when a loan settles, typically 0.5%–0.7% of the loan amount. For a $600,000 loan, that’s around $3,000–$4,200.
• Trailing Commission: An ongoing annual payment (typically 0.15%–0.3% of the loan balance) for as long as the borrower stays with the lender.

While commissions don’t directly increase your interest rate, they can influence which loans a broker recommends. Some lenders pay higher commissions, potentially skewing advice toward less competitive products.

Borrowers should always request full commission disclosures. Responsible lending laws require brokers to be transparent, but it’s smart to ask for a written breakdown.

Alternative Ways to Secure a Lower Home Loan Rate

For borrowers going direct, there are several strategies to achieve better rates:

• Leverage a Strong Credit Score: Borrowers with scores above 700 typically access the best rates. Check and improve your score before applying.
• Compare Multiple Lenders: Obtain quotes from at least three to five lenders to benchmark offers.
• Negotiate Directly: Banks often discount rates for borrowers with stable income, good savings, and low debts.
• Refinance Regularly: Reviewing your loan every two to three years can uncover better deals and avoid loyalty penalties.
• Use Offset Accounts and Extra Repayments: Features like offset accounts can help reduce interest costs over time.
• Look for Cashback Offers: Some lenders provide $2,000–$4,000 cashback for switching loans, helping offset fees.

Should You Use a Mortgage Broker or Go Direct?

The best option depends on your financial profile, time availability, and loan complexity.

Brokers can add value for borrowers with non-standard income, multiple properties, or those wanting help navigating the process. Their access to a broad lender panel can surface deals you won’t find on your own.

For financially strong borrowers, going direct often delivers excellent rates—especially when negotiating with banks or taking advantage of customer loyalty programs.

The smartest approach? Compare both. Obtain broker recommendations, but also check direct lender offers. This dual-track strategy helps you secure the best rate and ensures you’re making an informed, cost-effective decision.

Final Takeaway

Whether you choose a mortgage broker or go directly to a lender, success hinges on doing your homework. Understand how loan products work, compare rates, and review your mortgage regularly. By staying proactive, you can optimise your borrowing costs and build long-term wealth through smarter financing.