ASIC flags gaps in mortgage brokers’ best interests duty practices in Australia

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ASIC review on broker duty

Highlights

ASIC's Report 840 found that in over 20% of cases among seven of eight aggregator groups, brokers recommend loans that are not the lowest cost available.
ASIC identified deficiencies in brokers' record-keeping for higher-cost loan recommendations and flagged weaknesses in loan recommendation, supervision, and complaints handling practices.
Complaints related to the best interests duty take longer to resolve than other complaints, prompting ASIC to call for improved data use and stronger dispute resolution processes per Regulatory Guides 273 and 271.

Review findings and compliance expectations

As reported by ASIC, Report 840 reviews 13 credit licensees across eight large mortgage broker groups and examines how they oversee compliance with the best interests duty and handle consumer complaints.

The regulator says existing processes generally align with its guidance, but identifies room to strengthen loan recommendation practices, supervision and complaints handling. It points to cases where brokers recommend a loan even when a potentially lower-cost alternative is available.

Seven of the eight aggregator groups report that brokers do not recommend the cheapest loan option in more than 20% of cases. ASIC says there may be valid reasons to recommend a higher-cost loan, including loan features that offer greater value, but in some instances brokers do not keep clear evidence showing why those recommendations serve the consumer’s circumstances.

ASIC Commissioner Alan Kirkland says mortgage brokers play a critical role in helping Australians make major financial decisions and that their market share brings a clear obligation to act in consumers’ best interests. He says licensees should closely monitor recommendations made under their licences, particularly where a lower-cost loan is available and cost differences are larger.

Industry impact and complaints handling

The review also finds that complaints involving the best interests duty take longer to resolve than other complaints. ASIC says some complaints are missed, withdrawn without being fully investigated, or delayed, creating risks for confidence in internal dispute resolution processes.

The report sets out actions for brokers to improve recommendation practices in line with Regulatory Guide 273 and highlights opportunities to make better use of data to detect conduct risks. It also calls for stronger complaints handling and reporting practices under Regulatory Guide 271.

ASIC’s review covers aggregator groups responsible for about two-thirds of mortgage broker representatives in Australia. The regulator says it expects mortgage broker licensees to consider the findings carefully and address gaps in their practices, using data covering the period from April 1, 2023 to March 31, 2025.

Our earlier article on the U.S. housing market slowdown outlined how higher mortgage rates around 7% have cooled demand, pushed pending home sales lower, and increased buyer leverage as listings rose and sellers cut prices. It also noted that the higher-rate environment can have broader knock-on effects, including mortgage-hedging flows that add pressure to bond markets.

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