What is Best Interests Duty For Mortgage Brokers? And Why Does it matter?

Best Interests Duty for mortgage brokers came into effect on January 1, 2021. The small and the short of it – mortgage brokers are now required by law to always act in the best interests of their clients and to put their interests ahead of their own when providing any lending advice.

Honestly, there is a big song and dance about this which is a little worrying from our point of view. I would have thought that if you want to work with a client in the long term then you would want to always put their interests ahead of your own.

I guess the good news is, in all of this – that some of the dodgy operators will be squeezed out of the industry because they can no longer comply with the law. Unfortunately, there is always a loophole in any law. So don’t expect that every broker in the industry will be an angel.

Best Interest Can Be MORE Than Just The Lowest Rate or Repayment.

The interest rate, fees and charges, and repayment size are important factors in making a best-interest recommendation but they are not the only factors. Having said that, when Mortgage World Australia shortlists a loan, the rate, fees, and charges as well as the repayment size need to be competitive for the home loan product type required or they won’t even be shortlisted.

There are plenty of times when Best Interest is not the cheapest option on the market.

Oftentimes the lowest/cheapest loan is more difficult to be approved for or the client may not qualify for it. It’s not wise to recommend a loan to a client that they won’t get – it certainly doesn’t help the client.

There are times too when speedy settlement, or additional loan features are more important than the lowest possible repayment. For example, if you need to settle in 30 days there are lenders that I wouldn’t use just because they move at a glacial pace.

Likewise, if a client needs or wants an offset account or an interest-only loan – which does make sense in certain circumstances, then they might miss out on a cheaper loan in order to get those features.

In those circumstances even before Best Interest Duty came in I always talked my client through the implications of their choices.

Not Everyone In The Industry Is Subject To Best Interest Duty.

Not everyone in the industry is subject to Best Interest Duty. Mortgage Brokers are, direct lenders are not. Those are the people who work for a lender themselves and only sell their own products. Imagine going to the NAB and asking for a loan and being told to go to ANZ because they have a better product. That’s why ‘direct lenders’ are exempt. So be warned if you want to go directly to a lender – that is what you are risking.

The way I see it, despite all the song and dance – the way we’ve done business at Mortgage World Australia has always complied with the new Best Interests Duty requirements. For us, it’s no big change in operations. A bit more paperwork but otherwise no difference.

We’ve always worked to secure our clients the best deal possible because a happy client is likely to be loyal and is more likely to refer. Which is the best way to do business, with loyal clients for a lifetime.

Regardless of it you are a first home buyer, investor or just looking for a better deal on your home loan then by all means call 1300 661 211 or register online at

https://www.mortgageworldaustralia.com.au/contact-us/ and we’ll help you figure out what’s the best way to finance your home or investment.