Brokers In The Firing Line
Money Magazine Australia|September 2017

Upfront fees, trailing commissions and other perks add to mortgage costs

Effie Zahos
Brokers In The Firing Line

Are mortgage brokers overpaid? It’s a valid question and one that was asked by the investment bank UBS in its report into the mortgage broking industry back in May. On a $500,000 loan a broker would on average receive an upfront commission of $2700 from the lender (this doesn’t include the aggregator’s cut). Typically a broker would also receive a trailing commission of 0.14% from the lender over the life of the loan. This would be $700 in the first year and decline each year as the loan is paid down. Too much? Maybe but I could also ask the same question about real estate agents. Commissions on a $500,000 property can be $10,000 to $15,000. Not bad given properties in a hot market can sell in less than 31 days.

I personally don’t care what mortgage brokers get paid. After all, it’s not coming out of my pocket. This may sound naive and probably is, as somewhere down the line somebody is paying.

According to UBS, commissions paid to brokers exceeded $2.4 billion in 2015, adding 0.16%pa to the cost of every mortgage.

Would consumers see savings on their home loans if commissions were cut? I highly doubt it. Would I pay a broker $2700 to secure me the best home loan? Probably not, as it now sounds a little too steep.

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