The imposition of a best interest duty on mortgage brokers has been validated by new Australian Securities and Investments Commission (ASIC) consumer research.
But the same research has given rise to a suggestion by ASIC that it follow through on a Productivity Commission recommendation to develop a home loan interest rate tool to enable consumers to compare their interest rate with the media market raid paid by borrowers similar to them.
The regulator said that its research had confirmed that consumers who used mortgage brokers expected the brokers to act in consumers’ interests.
However, the ASIC report again highlighted the regulator’s concerns about upfront and trailing commissions having the potential to cause conflict between the interests o the consumer and the interests of the broker.
It said that while the consumer research revealed that consumers were aware that brokers received commissions, “it was not always clear that they understood that a broker is likely to receive different commission payments based on the lender selected, and that this presented a conflict of interest”.
Dealing with the best interest duty, ASIC said the royal commission had recommended that the law should be amended to provide that, when acting in connection with home lending, mortgage brokers must act in the best interests of the intending borrower.
“On 19 August 2019 the Government announced that a best interest duty for mortgage brokers will be introduced by the end of 2019. Importantly, the implementation of this duty will align the role of brokers with the expectations of consumers,” ASIC said.