Mortgage Broker

Mortgage Brokers are intermediaries between the mortgage lender and borrower who distribute mortgage loans on behalf of banks, building societies, credit unions and non-bank lenders such as securitised mortgage lenders and private mortgage lenders.

How Mortgage Broking Evolved

Banks and other mortgage lenders used to distribute their own products. However as markets for mortgages have become more diverse, the role of the mortgage broker has evolved as a specialist role to assist borrowers to choose the right mortgage product.

Developed Mortgage Markets For Mortgage Brokers

The main developed mortgage markets are:

Mortgage Brokers are the main distribution channel of mortgage products for mortgage banks and non bank lenders.

Mortgage Broker Regulation

Mortgage Brokers are regulated to ensure compliance with legislation. Each Country has different regulations, and each State within the US and Australia may have different laws, so you need to check this before you engage a mortgage broker.

US Mortgage Brokers

There are approximately 50,000 mortgage brokerage companies that employ an estimated 400,000 employees and originate 68% of all residential loans in the U.S.

The remaining 32% is retail done through the lender's retail channel, which means the lender does not go through a broker.

Australian Mortgage brokers.

Mortgage Brokers have evolved in Australia since the early 1980's however they have only become a dominant force in the mortgage industry during the late 1990's on the back of aggressive marketing by Aussie Home Loans & Wizard Home Loans.

Approximately half of all loans secured by a mortgage in Australia are introduced by mortgage brokers.

How are Mortgage Brokers Paid?

Australian mortgage brokers may or may not charge a fee for their services as they are paid by the lenders for introducing loans[4].

They are paid an up front commission that is on average 0.66% of the loan amount and an ongoing trail commission that is on average 0.18% of the loan amount per annum paid monthly.

These commissions can vary significantly between different lenders and loan products, especially since the commission re-alignments introduced by Australian banks during June to August 2008 in reaction to the Subprime mortgage crisis.

If I Use A Mortgage Broker Will I Pay More For My Loan?

Although mortgage brokers are paid commissions by the lenders this does not alter the final rate or fees paid by the customer as it may in other countries. Mortgage brokers do not have the ability to charge the customer a higher or lower rate and in return obtain a higher or lower commission.