Off-the-plan apartment developers are paying mortgage brokers up to $20,000 for each lead that results in a sale.
The referral fees do not always have to be disclosed, leaving unsuspecting consumers vulnerable to being steered into property investments where the broker has a clear conflict of interest.
One mortgage broker from inner Melbourne, who spoke on condition of anonymity, said the going rate was about $10,000 although he had been offered as much as $20,000.
A mortgage broker from Sydney, who also did want to be named, said the going rate was up to 3 per cent of the purchase price of the property.
Sometimes, the referral fees are paid to mortgage brokers whose main business is marketing apartments on behalf of developers.
Referral fees can be worth more to brokers than the commissions paid by lenders for selling the lenders' mortgages.
Jon Denovan, a partner with lawyers Gadens who specialises in financial services regulation, said if the broker makes the referral at the same time as arranging finance any referral fees have to be disclosed to the client.
He said if broker makes a referral where there is no credit advice being given, credit laws do not apply and any referral fees would not have to be disclosed.
Alarm bells should start ringing if the merits of an investment, any investment, are being talked up by someone.
Buying a property is a major transaction and being steered to a particular developer has to be treated with scepticism.
Property analysts have often said that a large part of the success or otherwise of a property investment depends on not overpaying for the property in the first place.
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