Mortgage brokers hold a dominant share of the market, and their average annual income sits above $180,000. This high figure might lead some to believe that brokers are extremely wealthy and potentially overpaid.
However, the reality for new entrants to the field can be quite different.
“There seems to be a misconception that brokers get paid handsomely without much effort,” said Chris McGirr (pictured above), a mortgage broker and managing director of 180 Finance.
McGirr, who transitioned to broking from project management during the pandemic, offers a contrasting perspective, particularly for those just starting out.
“When I started the business cost me $40,000 to run and I took home nothing. After two and a half years, I have expenses including wages of about $120,000, so all of this needs to be considered, before I get paid.”
The challenge of business costs
Last weekend, the Australian Financial Review published two opinion articles that criticised broker remuneration, with one asserting that the average Sydney broker is pocketing $670,000 per year. Both were roundly denounced by the mortgage industry.
“I read an article that suggested Australian brokers earn $400,000 per year,” McGirr said. “I can tell you that if there is a brokerage making this sort of money, it is probably in Sydney and they would also have a lot of that go to staff, rent and other overheads.”
“I believe brokers on salary are earning $50,000-$80,000 per year and in some cases, it will include bonus structures, for bringing in new clients, which is nothing to write home about,” he said.
“For those on commission and running their own business, they have an opportunity to make more, based on the time and effort they put in, though growing a business will result in high operating costs including office rent and wages.”
As LMG executive chairperson Sam White said in his response to the article, brokers operate a business, incurring typical business expenses such a rent, marketing, business insurance, and salaries. They also face more industry-specific charges such as technology charges, aggregation and association fees and the potential of clawbacks.
McGirr said the challenges of business costs are amplified for new-to-industry brokers, who also need to learn and understand the lending process and policies.
“It depends on their background, but for new entrants knowing how and when you will get paid is probably the toughest,” he said.
“Before you even start you will be up for about $20,000 a year in licencing, insurance, software, and mentoring. Like many other businesses, you may be waiting one or two months from settlement before you get paid.”
The challenge of competition
Another major challenge is that the industry has gotten increasingly competitive.
Firstly, there are simply more brokers in the industry than ever before, reaching a record 19,456 brokers in the six-month period between October 2022 and March 2023, according to the latest MFAA figures.
Secondly, they are writing fewer loans for a lower value. While the broker population grew by 4.7%, overall new loan settlements decreased by 8.6% in the same period.
Nationally, the number of applications lodged per active broker had also declined from 22.5 to 18.9 year-on-year and the value of settled loans also decreased from $10.72 million to $10.08 million over the same period.
Thirdly, brokers are actually earning less money than before. The average annual broker commission, prior to costs, was $181,199, a 7.33% decrease year-on-year.
These macro-industry trends combined with the everyday pressures brokers face – from extra compliance and overhead to the challenges of securing new opportunities, building teams, accessing resources, and staying profitable – have caused many brokerages to consolidate and merge.
So, while recent MFAA statistics show brokers continuing to take market share from banks, with a record high of 74.1% of home loans being facilitated by mortgage brokers, it’s a competitive environment to start broking in.
McGirr said the industry’s breakneck pace left him little time to start feeling comfortable in his ability to bring in clients.
“I needed to put food on the table, so I didn’t have time to feel comfortable,” said McGirr.
“You need to put your big boy pants on and go out and sell yourself and you are competing with 19,000 other brokers, who all have more experience than you, but if you want to get fed, so you need to work hard for it.”
The verdict: It's a rewarding but challenging career
Being a mortgage broker offers the potential for a good income, but it's far from a guaranteed path to riches.
New entrants face a period of financial strain while establishing themselves and building a client base.
The rewards are there for those who are prepared to put in the hard work and navigate the complexities of the industry.
