If it is true that commission mortgage brokers charge more, then it should also be true that banks have the lowest mortgage rates and fees. Simple logic says that the amount saved, which would have been paid to the mortgage broker as a commission, should be given to the borrower, right? 

In order to test this assumption, we surveyed the refinance rates offered by a selection of both mortgage banks and brokers. According to our survey, the difference in mortgage rates was at most, about 1/8 of a percent, with mortgage brokers often having the lowest refinance rates. Banks and credit unions may have an advantage for better home equity loan rates and fees. Our survey does not claim the final word, but it appears that banks are not giving away the store.

It turns out that banks and brokers use the same mortgage investment companies as their source of funds. Wholesale loan prices tend to be consistent among lenders, other than a potential volume discount. Some mortgage banks in effect also compete with themselves by having both a retail division, and a wholesale division that gives brokers the ability to sell the same mortgage programs. 

Free market competition can also prevent zealous overpricing of refinance rates. Regardless of how they are paid, if a mortgage broker cannot offer competitive rates to borrowers, they won't be able to sustain their business. As long as borrowers continue to compare rates and loan fees, banks and brokers need to abide by market pricing, and also try to provide more efficient customer service.