Mortgage Broker vs Going Direct to the Bank: Which is Better?

The Big Question: Broker or Bank?

You know how difficult it can be to get a straight answer about interest rates. The choice between a mortgage broker and a bank usually comes down to convenience versus cost.

We find that most clients are surprised to learn just how significantly the market has shifted. Recent data from the Mortgage & Finance Association of Australia (MFAA) shows that brokers now settle over 76% of all new residential home loans as of late 2024.

This massive shift isn’t accidental; it reflects a desire for choice in a complex market.

How Each Approach Works

Going Direct to a Bank

You approach a single lender—often your existing bank—and apply for their specific products.

The process:

1. Visit a branch or apply via their app
2. Speak with the bank’s lending specialist
3. They assess you against only their credit policies
4. You receive an offer for their specific product

Using a Mortgage Broker

A broker acts as an intermediary who compares policies and rates from a massive panel of lenders to find the right fit. Our home loans service does exactly this.

The process:

1. Meet with a broker to discuss your financial roadmap
2. Broker assesses your borrowing power across 30-70 lenders
3. Recommends options that fit your specific income type and goals
4. Handles the application, compliance, and negotiation
5. Manages the process through to settlement

Advantages of Using a Mortgage Broker

1. The “Best Interest Duty” Protection

This is the most critical difference between the two options. Since January 2021, mortgage brokers in Australia are legally required to act in your best interest (Best Interest Duty or BID).

We must prove that the loan we recommend puts you in a better position than the alternatives. Bank staff have no such legal obligation; they are employed to sell their employer’s products to maximize shareholder return.

2. Access to Multiple Lenders

We work with a massive panel of over 70 lenders. This list includes:

• Major banks (CBA, ANZ, NAB, Westpac)
• Second-tier banks (ING, Suncorp, Bank of Queensland)
• Credit unions and building societies (Great Southern Bank, Teachers Mutual)
• Non-bank lenders
• Specialist lenders for complex scenarios

Every lender has a different “risk appetite” for things like overtime income or postcodes. A rejection from one bank doesn’t mean you can’t get a loan; it often just means you asked the wrong lender.

3. Avoiding the “Loyalty Tax”

Banks rely on customer inertia to make a profit. The ACCC’s Home Loan Price Inquiry confirmed that existing customers with loans older than 3-5 years pay significantly higher rates than new customers—often a gap of around 0.58%.

We constantly review the market to ensure your rate stays competitive with new customer offers. Negotiating these “front book” rates for existing clients is a core part of our service.

Real example: A client came to us with their bank’s rate of 6.34%. We found a comparable product at 5.99% with another lender - saving $1,750 per year on a $500,000 loan.

4. Policy Knowledge for Complex Income

Different lenders treat income differently, which is vital for many of our clients.

• Self-employed: Some lenders require 2 years of tax returns; others accept 1 year or just BAS statements.
• FIFO/Mining: Some banks only use 80% of your overtime income, while others use 100%.
• Casual employees: We know which lenders annualize your income versus those who require a 12-month history.

This specific knowledge prevents your application from being declined due to a technicality.

5. Application Management

We handle the paperwork and follow up. This includes:

• Preparing your application
• Gathering documentation
• Submitting to lender
• Chasing progress
• Coordinating with conveyancers/solicitors
• Managing conditions
• Guiding through to settlement

6. No Cost to You (Usually)

In most cases, our service doesn’t cost you anything. Lenders pay us a commission when your loan settles, which is disclosed fully to you.

The rate you receive is the same—and often better—than if you went direct.

Advantages of Going Direct

1. Speed for Simple Loans

If you have a standard PAYG income, a 20% deposit, and perfect credit, a bank can sometimes be faster. Some major banks use Automated Valuation Models (AVMs) to approve simple loans for existing customers in under 24 hours.

2. Specific Proprietary Products

Occasionally, a bank has a specific product or promotion that is “branch only.” These are becoming rare, but some “package” discounts involving credit cards and insurance are easier to set up directly.

3. Simplicity

One point of contact, one institution, everything in one place. Some people prefer the simplicity of seeing their mortgage next to their savings account in one app.

Comparison: Broker vs. Bank

Feature	Mortgage Broker	Bank
Duty of Care	Legally required to act in your Best Interest (BID)	Acts in the bank’s interest
Product Choice	30-70+ Lenders	1 Lender
Cost to You	Usually Free	Free
Credit Impact	1 Enquiry for multiple comparisons	1 Enquiry per application
Paperwork	Done for you	Done by you

When to Use a Broker

Your situation is complex:

• Self-employed or business owner
• Multiple income sources (casual, overtime, bonus)
• Credit issues or defaults
• Unusual property types (e.g., smaller than 50sqm)
• First home buyer navigating schemes like the Home Guarantee Scheme
• Investment property portfolio

Complex situations need the right lender policy, not just a good rate. The wrong choice here leads to an unnecessary decline on your credit file.

You’re time-poor:

We do the legwork. You provide documents once, and we format them for any lender.

You want independent advice:

Bank staff are sales employees. We are independent professionals who work for you, not the bank.

You’re buying at auction:

Pre-approval robustness varies wildly between lenders. We ensure your pre-approval is fully assessed so you can bid with confidence.

When Going Direct Might Work

You have a “Gold Plated” relationship:

If you have significant assets with a private bank, they may offer you terms that are not available to the general public.

You are refinancing internally:

Sometimes, simply calling your current bank’s retention team can get you a rate drop. We actually encourage clients to try this; if the bank matches the market, you save the hassle of switching.

You want a specific digital feature:

If a particular bank has a unique app feature (like a specific spend-tracker or crypto integration) that you absolutely need, you may need to go direct.

The “I’ll Just Check My Bank” Trap

Many people think they’ll “just see what their bank offers” before using a broker. This seems logical, but it carries a hidden risk.

1. You speak to the bank’s lending specialist
2. They run a hard credit check (this stays on your Equifax file for 5 years)
3. They give you an offer that seems reasonable
4. You feel obligated because you’ve started the process
5. You accept without truly knowing if it’s competitive

Better approach: Speak to a broker first. We can assess your borrowing power across the market without triggering a hard credit enquiry on your file until you are ready to proceed.

Questions to Ask Your Bank

If you do go direct, ask these hard questions:

1. “Is this your best rate, or is there room to negotiate?”
2. “Does this loan have a ‘loyalty tax’ where the rate creeps up after 2 years?”
3. “How does this compare to what a mortgage broker could get me?”
4. “Are there any discharge fees if I leave in 12 months?”
5. “Can you provide a property valuation upfront?”

Common Misconceptions

”Banks give better rates to direct customers”

Generally false. Banks pay broker commissions, but they also have massive overheads for branches and staff. The interest rates are typically identical, and brokers can often access “unpublished” rates.

”Brokers only recommend lenders that pay them more”

This is illegal under the Best Interest Duty (BID). Commissions are highly standardized (usually around 0.65% upfront), and we must document exactly why a specific lender is better for you, regardless of what they pay us.

”My bank will look after me because I’ve been loyal”

Banks are businesses, not friends. The “loyalty tax” data shows that existing customers almost always pay more than new ones.

”Using a broker takes longer”

Usually the opposite. We know exactly what documents each lender requires upfront to get a “First Touch Approval,” avoiding the back-and-forth delays common with direct applications.

How We Work as Brokers

Our process:

1. Discovery - We analyze your income, spending, and financial goals.
2. Analysis - We compare options across 70+ lenders using advanced software.
3. Recommendation - We present a shortlist of 3 options with a clear “Best Interest” rationale.
4. Application - We package your data to meet the specific lender’s policy requirements.
5. Management - We track the application daily and resolve lender queries.
6. Settlement - We coordinate with your solicitor to ensure funds clear on time.
7. Ongoing - We review your loan annually to ensure you aren’t slipping into a “loyalty tax” bracket.

What we don’t do:

• Push products that pay us more
• Recommend loans that don’t suit you
• Disappear after settlement
• Charge you fees in most cases

Gladstone Perspective

For local borrowers, using a broker often adds extra value due to the specific nature of our regional economy.

Regional expertise: We know which lenders have “postcode restrictions” in certain Gladstone suburbs or high-density zones.

Industry knowledge: Mining, resources, and FIFO industries have specific income patterns involving allowances and overtime. We know which lenders accept 100% of this income versus those who shade it to 80% or less.

Local relationships: We work with local conveyancers, real estate agents, and accountants - coordination is smoother.

The Bottom Line

For most people, using a mortgage broker is the smarter choice. You get access to more options, legal protection through BID, and the legwork is done for you - at no cost.

The only time going direct clearly wins is if your bank has a genuinely unbeatable offer (which is rare), or if you have a unique product requirement.

Let’s Compare Your Options

Not sure if your bank’s offer is competitive? The market changes weekly, and yesterday’s good rate might be today’s expensive one.

Book a free consultation. We’ll show you exactly how your current or proposed loan compares - and whether you can do better. No obligation, no cost.