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Last week the government introduced a draft bill into parliament containing a new “best interests” obligation on mortgage brokers. It follows from the final report of the banking royal commission where the recommendation was made by commissioner Kenneth Hayne.
Previously, the obligation on mortgage brokers was to recommend loans to clients that were deemed “not unsuitable”. So the proposed change is clearly a more onerous one, and the idea is that consumers stand to benefit.
My personal view is that mortgage brokers should already be putting their clients’ interests ahead of their own (more on this below). But if brokers are serious about dominating the market (they already have c 60% market share, and this is rising), then the industry needs to embrace changes which add legitimacy to the industry, and which protect consumers.
However, the definition of “best interests” needs to be considered carefully, and whatever the new obligations – these need to be administered so as to not drive away good brokers from the industry.
If the compliance requirements were to become too onerous, and/ or if practitioners in the industry can earn better/ easier money elsewhere, then many will do just that – leave the industry and pursue other career opportunities. This would be unfortunate, and only disadvantage consumers…
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