Alan Kirkland
The mortgage broking industry should strengthen how it demonstrates that home loan recommendations are in their customers’ best interests, an ASIC review has found.
Released today, ASIC Report 840 Mortgage brokers: Review of best interests duty and complaints handling practices (REP 840) examined 13 credit licensees that make up eight large mortgage broker groups. It looked at how they ensure their credit representatives comply with the mortgage broker best interests duty and consumer complaints.
ASIC Commissioner Alan Kirkland said that the review showed while mortgage brokers had existing processes to support acting in their customers’ best interests, the industry needed to do more to ensure those processes delivered consistently for consumers.
‘Mortgage brokers can play a critical role in helping Australians make one of the most significant financial decisions of their lives.
‘More than 80% of home loans are now arranged through mortgage brokers. With that level of influence comes an obligation to act in consumers’ best interests when recommending a loan,’ Mr Kirkland said.
ASIC’s review found that mortgage brokers’ practices generally aligned with our guidance. However, it also identified that brokers and aggregators could strengthen loan recommendation practices, supervision and complaints handling. This included cases where brokers recommended a loan when a potentially lower cost alternative was available.
Seven of the eight aggregator groups reported that brokers did not recommend the cheapest loan option in more than 20% of cases. While there may be reasons to recommend a higher-cost loan, such as greater benefits from certain loan features, ASIC found instances where brokers did not have clear evidence to support those recommendations.
‘Where a broker recommends a loan that costs more than the available alternatives, consumers should be able to clearly understand why that recommendation delivers greater value for their circumstances,’ Mr Kirkland said.
The review also found that complaints about the best interests duty took longer to resolve than other complaints.
‘When customers raise concerns about a home loan recommendation, they should expect those concerns to be considered and resolved promptly,’ Mr Kirkland said.
‘Our review found complaints being missed, withdrawn without being fully investigated, or delayed. When complaints are not handled properly, confidence in the complaints process can be undermined.’
The report outlines actions for mortgage brokers to strengthen loan recommendation practices, consistent with Regulatory Guide 273 Mortgage brokers: Best interests duty (RG 273). It also highlights opportunities to improve the use of data to identify conduct risks and strengthen complaints handling and reporting practices under Regulatory Guide 271 Internal dispute resolution (RG 271).
‘Acting in customers best interests is fundamental to trust in the mortgage broking industry. Consumers rely on brokers to help them navigate a complex market and recommend products that meet their needs,’ Mr Kirkland said.
‘Licensees should closely monitor recommendations made by brokers operating under their licence, particularly where a lower-cost loan is available. The greater the cost difference, the stronger the evidence needed to show the recommendation is in the consumer’s best interests.
‘Consumers place significant trust in mortgage brokers. Strong supervision, effective monitoring and robust complaints handling help ensure that trust is well placed.’
ASIC expects mortgage broker licensees to carefully consider the findings in this report and take steps to address gaps in their practices.
Background
The best interests duty is a legal obligation requiring mortgage brokers to act in the consumer’s best interests when recommending a home loan.
ASIC’s review covered aggregator groups responsible for approximately two-thirds of mortgage broker representatives in Australia. ASIC obtained data from aggregators covering the period from 1 April 2023 to 31 March 2025.
Aggregator groups reviewed by ASIC
- Australian Finance Group Ltd
- Connective Credit Services Pty Ltd
- Finsure Finance & Insurance Pty Ltd and Beagle Finance Pty Ltd
- Lendi Group Distribution Pty Ltd – part of the Lendi Group (Aussie)
- Loan Market Pty Ltd, LMG Broker Services Pty Ltd and BLSSA Pty Ltd – part of Loan Market Group
- Mortgage Choice Pty Ltd and Smartline Operations Pty Ltd
- Outsource Financial Pty Ltd
- Yellow Brick Road Aggregation Pty Ltd (Vow Financial) and Yellow Brick Road Finance Pty Ltd (Yellow Brick Road)
For consumers
For information about using a mortgage broker and the questions to ask when choosing a home loan that meets your needs, go to ASIC’s free Moneysmart website for consumers.