Best Interest Duty
On the first of January, 2021, the Best Interests Duty for mortgage brokers went into effect. Essentially, it is the obligation that, as a mortgage broker, you will act in the best interest of your clients and will prioritise their interests when you provide credit assistance.
How do you assess your client’s best interests?
When assessing your client’s best interests, you should keep the following guidelines in mind:
- The cost of the product you are selling. Interest rates, fees and the repayment amount should all be factored in when analysing cost.
- The net value. You should also consider whether or not the loan features and the cost have a reasonable chance of offering your client the best net benefit compared to other loan options.
- In the case of conflicts of interest, what is best for the client should always win out.
How does BID affect you?
As a mortgage broker, you are obligated to provide your client with all the information needed to make an informed decision about a loan. If they request certain loans that may not be right for them, you have to explain why the loan may not be suitable for them while still allowing them to make their own decision. If they do not want to work with specific lenders, you still have to recommend the lender’s loans if they are a good fit for your client.
Banks are not obligated to act under the Best Interest Duty; therefore, it is your job as a mortgage broker to look out for the clients who hired you. You need to look at your client’s whole financial situation, plans, and financial objectives when recommending products. Your job is to provide them with all the information they need to make an informed decision.
When helping your client find a home loan, consider working with Mortgage Street. We are a specialty lender operating outside of the traditional lending system, enabling us to approve more significant loan amounts with competitive interest rates.