• 28/07/2021

New law puts brokers in box seat

Great news for anyone planning to take out a home loan – new legislation means consumers are even better protected when they use a mortgage broker.

But banks do not have the same responsibility towards borrowers.  This means that consumers can have even more confidence in brokers

The Best Interests Duty, which took effect this year, legally obliges brokers to act in the best interests of their clients. This new law is on top of the National Consumer Credit Protection Act, which already regulates the conduct of brokers.

Brokers must “prioritise their consumers’ interests” if there’s ever a conflict of interests, according to the legislation.

But while brokers have to follow the Best Interests Duty – banks do not. A broker must give their client the best possible recommendation from all the lenders on that broker’s panel. However, a bank will recommend only its own products, even if there are better alternatives.

Brokers act in your best interests when recommending a home loan and have a legal obligation to do so.

But, if a customer walks into their local branch, they won’t be told if there’s a better offer down the road.

With around two thirds of loans now arranged by brokers, the Best Interest Duty test makes is more likely that customers will turn to them for help.

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4 Comments

  • By the time the Broker has assessed some 400 possibilities & combinations, including all the credit cards, pros & cons of every lender’s transaction accounts, term deposit rates, mortgage offset, redraw fees and rules, serviceability for each option/lender, serviceability with and without the “package” (basic vs package) the client would have entered the Bank, completed a brief application (no need to determine what is in their best interest, just process the application) been presented with, & signed, the loan documents & settled the deal. The Broker would still be searching for another Broker with a different lending panel that might be able to offer something more in their best interest so he/she doesn’t get sued 6 years later.

    • Quite right Rod. But, with two thirds of loans written by brokers, we must be winning surely?

  • ?? Confused. How do I moderate what is totally factual

  • That is totally useless legislation.

    I concur with Rod and Graeme.

    Interest rate is a factor, but NOT the only factor.

    Yes – there are so many options out there.

    In the last 20 years I use only a handful of lenders in the market.

    Each one has a specific purpose for the client to satisfy their needs. Are they the best? Yes they are (despite me not going out there to make comparisons – thats their job to let me know) – AND I have no time to troll the backstreets or alleyways when I know where to go already.
    Am I responsible? Sure – but this legislation has to be viewed with reason on the basis of what we are seeking for the client.

    Personally – I think this is a waste of time.

    For the newbie younger brokers I offer a word of advice (oops – I cant do can I?) oh well – As I was saying, Pick the eyes our of the Lenders in the sectors you deal with and develop those relationships.

    They’re as or more important (in some instances) than marketing to your client database. It’s a holistic approach.

    Good Luck

    MG

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