Mortgage brokers and small lenders warn that a royal commission-led overhaul of the fees brokers can charge will be bad for borrowers and benefit the big four banks, especially the nation's largest, Commonwealth Bank.

It would be ironic if the Hayne inquiry targeting misconduct in the major banks ended up enhancing their market power, but mortgage brokers and non-bank lenders are concerned that's precisely what will happen if the industry remuneration model shifts to a flat fee and eliminates trailing commissions.