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Mortgage brokers will soon be required to act in the best interests of borrowers and not push them into taking out high interest loans when better deals are available.
That's according to the Australian Securities and Investment Commission (ASIC) which has started a four week consultation on draft guidance for new laws about the best interests duty (BID) for mortgage brokers.
The new requirements will kick into effect from 1 July.
It comes in response to one of the recommendations of the Royal Commission to ensure brokers act in the best interests of consumers and prioritise their interests when providing credit assistance.
ASIC Commissioner Sean Hughes said borrowers should feel confident their mortgage broker has their best interests at heart.
"The obligations properly align the interests of mortgage brokers with the interests and expectations of their clients - the borrowers," Mr Hughes said.
"Consumers should feel confident that their broker is offering the best loan for their circumstances and we expect that consumer outcomes will improve as a result of this reform."
The draft rules suggest that mortgage brokers should "consider products holistically to assess whether they are in the consumer's best interests.
"The cost of a product - such as interest rate, fees and charges and repayment size - is a factor that should generally be prioritised during this assessment," the draft reads.
"Where other non-cost considerations affect what is in the consumer's best interests, brokers should assess whether those considerations or loan features have a realistic possibility of offering the consumer good value or a net benefit relative to other options."
Thinking about refinancing to a low-rate, variable owner-occupied home loan? Below are a handful of low-rate loans in the market.
Lender | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Variable | More details | ||||||||||||
| UNLIMITED REDRAWS | |||||||||||||
Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%) | |||||||||||||
| Variable | More details | ||||||||||||
| FEATURED100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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| Variable | More details | ||||||||||||
| FEATUREDREFINANCE ONLY | Variable Rate Home Loan – Refinance Only
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Variable Rate Home Loan – Refinance Only
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| Variable | More details | ||||||||||||
| FEATUREDAN EASY DIGITAL APPLICATION | Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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Neat Variable Home Loan (Principal and Interest) (LVR < 60%)
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| Variable | More details | ||||||||||||
| FEATURED | Green Home Loan (Principal and Interest)
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Green Home Loan (Principal and Interest)
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- Min 30% deposit
- No monthly or ongoing fees, add 0.10% for offset
- Unlimited redraws
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of August 10, 2022. View disclaimer.
The new rules aim to stamp out some mortgage brokers from pushing borrowers into unsuitable loans, or encouraging them to go with credit providers who pay fatter commissions.
"Most consumers do not pay mortgage brokers for their services. Typically, credit providers pay brokers for their services with commissions," the draft reads.
"These commissions can create conflicts of interest where they may influence the broker's recommendations in favour of the credit provider.
"A failure to consider cost and investigate the lowest cost options available to the consumer may be indicative of non-compliance."
The draft rules also state that brokers should present borrowers with a range of loan options, instead of just one or two.
"Consumer research found that consumers are often not presented with a range of options, with 58% of consumers surveyed receiving two or fewer loan options," it said.
"Our research also found that it is important that consumers are helped to understand the options presented, so they can meaningfully compare options."
Disclaimers
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.
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