Best Interests Duty for Mortgage Brokers 2026

Best interests duty requires a mortgage broker to act in the client’s best interests when providing credit assistance. You must give the client’s interests priority when they conflict with your interests or those of relevant related parties. Record why the recommended loan meets that client’s needs, including why you rejected reasonable alternatives.

For 2026, these obligations remain in Part 3-5A of the National Consumer Credit Protection Act 2009. Its current compilation is dated 1 July 2026. Sections 158LA and 158LE set the duty for relevant licensees and credit representatives, with conflict priority in sections 158LB and 158LF.

The Australian Securities and Investments Commission (ASIC) explains its approach in Regulatory Guide 273 (RG 273). As at October 2026, ASIC lists the guide issued on 24 June 2020. The duties apply to regulated consumer credit assistance, including assistance by a mortgage broker on other regulated credit products.

Establish What Matters to the Client

Establish the client’s priorities before comparing loans, including constraints that can change which loan you recommend. Record what the client wants to achieve and what happens if the loan misses that objective. A request for the lowest rate can sit alongside a fixed settlement deadline or a need to keep savings accessible.

Your fact find can record these points separately.

• The loan purpose, amount and intended repayment period.
• Income, expenses and debts, with evidence supporting the financial position.
• The settlement date and whether an extension is possible.
• Features the client will use, such as an offset account or extra repayments.
• Likely changes, such as parental leave or selling the property.
• Priorities the client is willing to trade against cost, with the reasons for that trade.

An offset account reduces the balance on which interest is charged. Its value depends on the savings the client expects to hold, alongside the product’s fees and rate. Record that expected balance before treating an offset as a reason to choose a costlier loan.

A Lower Rate That Misses Settlement

This fictional example follows Priya, who needs a $500,000 owner-occupied loan to settle on 20 October 2026. She wants low costs and expects to keep $20,000 in an offset account. Her conveyancer confirms the seller has refused a settlement extension.

All lender names, rates and file records below are invented for the example. They describe assumptions, not current lender offers or guaranteed turnaround times.

Fictional option	Variable rate	Offset and fees	Eligibility and timing evidence
Lender A	5.80% a year	Offset available, $300 annual fee	Income and security fit. Written response says the earliest settlement is 27 October.
Lender B	6.00% a year	Offset available, $300 annual fee	Income and security fit. Written case response supports 20 October, subject to its stated conditions.
Lender C	6.10% a year	Offset available, $300 annual fee	Income and security fit. Same achievable date and conditions as B.

Lender A has the lower rate, but its stated timing misses Priya’s deadline. On the stated facts, B costs less than C while meeting the same needs. B is the supported recommendation only while its conditions and timing remain achievable.

Keep Priya’s confirmed priorities, the contract and the conveyancer’s response with the lender correspondence. Record the missing conditions, who will complete them and by when. A generic statement that B is usually fast doesn’t explain why it fits this file.

The 0.20 percentage point difference between A and B means $1,000 more annual interest on an unchanged $500,000 balance before offset savings. That’s an illustration, not a repayment forecast. An actual comparison must use the expected balance over time and account for fees and offset use.

If the seller later agrees to settle on 28 October, reopen the shortlist. Lender A’s lower rate becomes relevant again because the original timing reason for excluding it has changed.

Compare Reasonable Options

Compare reasonable options against the same client facts, using price alongside features, eligibility and timing. Show what makes an option preferable and what stops the client accessing it. A loan passing a lender’s policy test doesn’t establish that it’s the best recommendation.

ASIC’s RG 273 guidance on cost and timing gives cost priority while recognising substantiated non-cost needs. A higher-cost recommendation needs evidence of the benefit to the individual client. Its guidance on panels says to decline assistance if the products you can access cannot serve the client’s best interests.

Account for Your Lender Panel

Record which lenders you can access and which accreditations limit the comparison. A lender panel is the group of lenders available through your broking arrangements. A comparison of that panel cannot establish that a product is best across the whole market.

In Priya’s fictional file, all three options are available through the broker’s panel. The broker also records an off-panel lender with a lower advertised rate, whose published property criteria exclude Priya’s security. Keep the dated criteria and the specific exclusion reason instead of dismissing it only because it’s off-panel.

If an off-panel option appears to meet a client’s needs better, explain your access restriction and assess whether you can still act in their best interests. Referral to a broker with the required access can be the appropriate outcome. A panel disclosure doesn’t make an otherwise poor recommendation acceptable.

Keep a Lender Decision Log

Keep a decision log while the research happens, with one entry for each meaningful option or exclusion. Use a version number whenever facts change. The following fields give another broker enough context to follow the decision.

Field	What to retain
Scenario version	Client facts, fact-find date and a record of what changed
Selection criteria	Priorities, required features, affordability constraints and deadline
Policy evidence	Lender, document title, relevant passage, source date and retrieval date
Price evidence	Dated rate quote, fees, loan term and comparison assumptions
Exclusion reason	Failed criterion and evidence, including panel or accreditation limits
Written clarification	Exact case question, lender response and any conditions or expiry
Servicing dependencies	Calculation inputs, income treatment, liabilities and outstanding verification
Decision owner and reviewer	Broker’s reasoning, review date and any additional licensee checks
Reopening trigger	Changed fact, policy, price or timing that requires a fresh comparison

Serviceability is the assessment of whether the client’s income can cover the proposed repayments and other commitments. Keep the calculation inputs with the result. A capacity figure depending on an unverified income item needs that dependency recorded.

Bulma quotes lender policy wording behind its answers, which you can keep with your file notes. Record the quoted lender document and its source date separately from Bulma’s policy-update date. The broker keeps responsibility for the recommendation and best interests duty.

When new information changes the answer, retain the earlier log and add the replacement decision with its reason. For example, Priya’s extended settlement deadline creates version 2 and reopens A. Silently replacing B with A would hide why B was reasonable under version 1.

Handle Conflicts and Document Reasons

Identify interests that can influence the recommendation and record how you give priority to the client. The conflict priority rule covers conflicts you know about and those you reasonably ought to know about. Consider remuneration differences and relevant relationships, including interests of your licensee and related parties.

Sections 158LB and 158LF require priority for the consumer when a covered conflict exists. Sections 158LE(2) and 158LF(2) require licensees to take reasonable steps to ensure their credit representatives comply. A process that only collects the client’s signature doesn’t show how the choice protects them.

A Completed Remuneration Conflict Record

In Priya’s fictional file, C pays the broker a higher commission than B. Both have the same relevant features and achievable timing, but C charges a higher interest rate. The broker recommends B and keeps the following record separate from the client’s acknowledgement.

Conflict field	Completed fictional record
Interest identified	C pays a higher commission than B on the same loan amount.
Client consequence	C costs more without a documented benefit over B for Priya.
Action taken	Compare the products using Priya’s criteria and recommend B despite its lower commission.
Evidence retained	Dated remuneration schedules, product comparison and broker’s reasons.
Explanation to client	Explain the commission difference and why B better meets the recorded priorities.
Oversight	Reviewer Maya checks the comparison and conflict action under the licensee’s procedure.

A conflict of interest disclosure explains the interest and its possible effect. A conflict action record explains what you did about it. ASIC’s RG 273 says disclosure or client consent alone cannot satisfy conflict priority.

Higher commission doesn’t automatically make a recommendation wrong. If the same product also best serves the client, record the evidence for that outcome. If you cannot prioritise the client’s interests, you must not provide the credit assistance.

Mortgage Brokers and Financial Advisers Have Different Rules

Mortgage-broker obligations sit in the National Consumer Credit Protection Act 2009. Financial advisers giving relevant personal advice to retail clients have separate obligations under the Corporations Act 2001. ASIC explains those in its financial-adviser best interests guidance.

The adviser framework includes safe-harbour provisions discussed in Regulatory Guide 175 (RG 175). RG 273 supplies no equivalent checklist that guarantees compliance for mortgage brokers. Use a credit-assistance record suited to the mortgage recommendation, rather than assuming an adviser template proves your duty is met.

Run the Best Interests Duty Checklist

Run this checklist before giving the recommendation, with supporting records attached to each decision. The completed column continues Priya’s fictional version-1 file. Use the same fields as a credit licence best interests duty template for another client, replacing every example with that file’s evidence.

Order and check	Completed fictional result	Supporting record	Reopen the shortlist when
1. Confirm client priorities	Priya needs $500,000 by 20 October, with an offset and controlled costs.	Fact find and priorities confirmed on 2 October 2026.	Purpose, amount, savings or priorities change.
2. Compare reasonable options	Compare A, B and C on the same amount and term.	Comparison worksheet dated 2 October.	A relevant new option or feature becomes available.
3. Check eligibility	B fits the recorded income and security, subject to valuation and final assessment.	Fictional policy extracts dated 1 October and lender’s 2 October case response.	Valuation, income, debts or policy change.
4. Assess costs	B is cheaper than C. A is cheaper than B but misses the current deadline.	Rate quotes dated 2 October and cost worksheet with balance assumptions.	Pricing, fees or repayment plans change.
5. Assess features	All shortlisted loans have the offset Priya expects to use.	Product terms and her expected $20,000 offset balance.	Offset use changes or a required feature is unavailable.
6. Test timing	B’s written response supports 20 October if its conditions are met.	Contract, refused-extension email and lender conditions with completion dates.	A condition slips, the lender revises timing or settlement extends.
7. Explain panel limits	Three accessible options compared. Off-panel property exclusion recorded.	Accreditation list and dated off-panel security criteria.	Access or property eligibility changes.
8. Resolve conflicts	Reject higher-commission C because it has no offsetting client benefit.	Remuneration schedules and conflict action record.	Remuneration or a relevant relationship changes.
9. Explain final reasons	Recommend B for achievable timing, required features and lower cost than C.	Written recommendation and Priya’s questions, with decision log version 1.	Any earlier trigger changes the reasoning.

The recommendation record can state: B meets Priya’s deadline on the written conditions, provides her required offset and costs less than C. A’s lower rate is unavailable within the documented settlement window. Reconsider A if the deadline extends or its achievable settlement date changes.

The legal duties are to act in the client’s best interests and prioritise those interests when a covered conflict arises. This checklist is a practical record structure. A licensee can add procedures such as second-person review, approved forms or a particular retention schedule.

Label those procedures as licensee requirements and record that you followed them. Their completion doesn’t replace the duties. The fictional reviewer entry above shows a process step, not a legal guarantee.

Keep the separate responsible lending assessment with the file because best interests duty and the unsuitability test answer different questions. Use the mortgage broker compliance checklist for the broader engagement checks. Before proceeding, ensure another broker can trace each final reason to its evidence and each changed fact to the decision it reopens.