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.