How we shadow shop mortgage brokers

We sent five home buyers to some of Australia's biggest mortgage broker businesses: AFG, Aussie and Mortgage Choice.

Evaluating the brokers

It's not surprising that half of new home loans are arranged by mortgage brokers. Going to a mortgage broker is convenient and the theory is that good brokers can educate consumers, find a competitive home loan and help with the loan application process.

But when we sent five genuine home loan shoppers to three of the biggest mortgage broker businesses in Australia, they received poor advice in many cases. Our shadow shoppers were seeking:

  • a loan for construction of a property
  • a first home loan
  • refinancing for a self-employed contractor
  • refinancing for a young family  
  • an investment property for a couple who had paid off their first home.

For more about these individual scenarios, read our article Mortgage broker shadow shop.

Our shadow shop methodology

Our expert panel

Our panel of home loan and mortgage broking experts rated the brokers.

Melissa Glienik

 Melissa Glienik

Award-winning mortgage broker with more than 14 years experience in the industry. She runs boutique business Smart Lending in Melbourne. Glienik's awards include: MFAA, Excellence Awards 2014 Mortgage Credit Advisor of the Year, AFG Loan Writer of the Year in the State of Victoria for two years consecutively and Better Business Awards Editors' Choice Awards 2015.

Katherine Lane

 Katherine Lane

Principal solicitor at the Financial Rights Legal Centre in NSW (formerly Consumer Credit Legal Centre) and a consumer advocate. The Financial Rights Legal Centre is a community legal centre focusing on issues that affect vulnerable and disadvantaged consumers in financial services, such as consumer credit.

Michael Lee

 Michael Lee

Mortgage expert and consumer champion. Founder of independent borrower agent service Flongle and co-creator of bSmart, a mortgage broker service that charges a flat fee and rebates any commission above this fee back to the borrower. Author of the consumer guide, Mortgage Free Debt Free, Industry Secrets You Must Know. Lee regularly provides insight and research to consumer advocates and the media.

Peter White

 Peter White

CEO of the Finance Brokers' Association of Australia. 35 years’ experience in the industry, White has held such roles as executive manager RAMS Home Loans, CEO of Wizard Home Loans (now owned by Aussie Home Loans), and general manager and CEO of various mortgage management and brokerage companies.

The mortgage brokers

We sent our shadow shoppers to the three biggest mortgage broker businesses in Australia, commanding a combined market share of close to 50%, according to IBISWorld.

 Australian Finance Group

Australian Finance Group (AFG). Australia's largest broking services company, with 2300 mortgage brokers. AFG is an aggregator, that is, a company that provides mortgage brokers with access to products and support but not a franchise.

 Aussie Home Loans

Aussie Home Loans (80% owned by CBA) is both a franchise and an aggregator, with 160 franchises and 440 mobile brokers.

 Mortgage Choice

Mortgage Choice is a franchise business and aggregator. It has 572 accredited brokers who are either franchise owners or consultants employed by franchise owners. Franchise owners are paid the same rate of commission regardless of lender or loan type.

How we shadow shop

All borrowers contacted their nearest mortgage broker. Not all mortgage brokers met with the borrowers – sometimes the advice was given over the phone and by email.

The borrowers filled out a pre-trial survey about their borrowing requirements, and then a detailed survey after their contact with the broker.

CHOICE instructed the shadow shoppers to not ask the broker about:

  • how they are paid or commissions
  • their experience or professional qualifications
  • how many or which lenders they can deal with
  • any fees or costs associated with the loan options.

We wanted to test if these important details were disclosed by the broker without being prompted.

The home buyer score

Our shadow shoppers evaluated the mortgage brokers on four things:

  1. The broker's professionalism.
  2. Their confidence in the broker's ability to fulfill borrowing or refinancing requirements.
  3. Their confidence in the recommended course of action for the mortgage.
  4. The likelihood they'd ask the broker to arrange a loan.
They rated them on a scale of 1 (very poor, not at all confident, not at all likely) to 5 (very good or very confident or very likely). The home buyer ratings were averaged – not all borrowers rated all brokers on all four counts, so sometimes the average is based on only three scores.

The expert score

Each expert rated each broker as poor, acceptable, good or exemplary. The experts received the pre-trial and broker surveys including the consumer ratings, information on the loan recommendations and whether the broker had given the consumer a credit guide. If relevant, the email exchange between the borrower and the mortgage broker was also attached. The experts did not know the identity of the brokers.

To receive a rating of good or exemplary, CHOICE suggested to the experts that brokers needed to:

  • collect comprehensive information from the borrower
  • give specific information about commissions and lender panel
  • provide education to the borrower
  • discuss more than one loan with the consumer and give an explanation about their recommendation
  • give home buyers confidence in their knowledge and advice.

Although CHOICE provided this rating guidance, all four experts are very experienced in the industry and their ratings were up to their own judgement.

Brokers received a rating from each expert:

  • 1 for poor
  • 2 for acceptable
  • 3 for good
  • 4 for exemplary

CHOICE calculated an average rating. If there was doubt, CHOICE rated in favour of the broker, for example two poor and two acceptable ratings were averaged as borderline.

How good were the loan recommendations?

Borrower agent Flongle and research company CANSTAR evaluated the loan recommendations. We asked each borrower to select one loan recommended by the brokers that best fit their needs. For Flongle they also needed to nominate their repayment amounts and when they were going to refinance the loan.

Loan recommendations
Scenario Broker recommendation Flongle savings CANSTAR
$500,200 construction loan CUA Fresh Start Variable $7052 over 10 years (progress payments not taken into account) This loan was ranked the fourth cheapest variable home loan ($500,000 and above) with 100% offset on 20 April 2015.
$305,200 loan for first home buyer Bank SA three years fixed $7083 over five years This loan was only ranked the 23rd cheapest three-year fixed loan ($300,000 and above) at the time the recommendation was made by the broker and also wasn’t in the top 10 on 20 April 2015.
$340,000 refinance for young family CUA Fresh Start Variable $3248 over 10 years This loan is ranked the third cheapest variable home loan ($300,000 and above) with 100% offset account on 20 April 2015.
$601,000 loan for investment property Newcastle Permanent Premium Plus Package Home Loan $7519 over 10 years This loan was ranked the second cheapest loan ($500,000 and above) with 100% offset account on 20 April 2015.


  • Refinance for the self-employed contractor scenario was not rated – most lenders would not offer a loan because of the unsecure employment record.
  • Flongle is a service that, for a fee of $99 (self-service) to $499 (full service), allows lenders (including the four major banks) and verified mortgage brokers to bid for your loan. Flongle then compares the offers against the best deal you've been offered. Some brokers rebate part of their commission.
  • Canstar, 20 April 2015. Methodology for ranking of variable home loans of $300,000 and 500,000:  
    • The variable loan tables are sorted for the cheapest total cost over a 25-year period which takes into account ongoing, upfront and discharge fees.
    • The three-year fixed loans also take the same fees into account and are sorted for the cheapest total cost over the fixed period of three years.