New research from finance regulator ASIC shows that a best interests test is needed more than ever in the mortgage broking sector.
"The ASIC research is clear - Australians expect that brokers will get them the best loan, but there is no guarantee that this is what they'll get."
"Nearly half of all people who see a broker end up with a loan with their existing bank. One in ten people are struggling with their home loan costs within a year," says CHOICE CEO Alan Kirkland.
"We have a major competition problem in the home loan sector but the mortgage broking sector isn't fixing it - it's making it worse. 49% of people who see a broker still end up with their existing bank. Given that most people have accounts with one of the big four banks it's very unlikely that they're getting the best deal."
"In 58% of cases, mortgage brokers are recommending just one or two loans and are not giving people the information they need to understand whether these loans are good options."
"Mortgage broking can and must be better. Australians, particularly younger, less experienced and less wealthy borrowers, are relying on mortgage brokers to get them a fair deal. They should be able to get advice they can trust."
CHOICE says requiring brokers to act in the best interests of their customers will help drive predatory sales practices away from the sector.
"This research demonstrates just why we need strong professional obligations for mortgage brokers, as recommended by the Royal Commission and proposed by the government. CHOICE is fighting for this new law to be as strong and clear as possible, with no loopholes."
CHOICE has released a guide for finding a good mortgage broker (CHOICE.com.au/FindAGoodBroker) and is warning Australians of the sales behaviour identified in multiple investigations.
Media contact: Jonathan Brown, 0430 172 669, firstname.lastname@example.org
A previous opinion piece from CHOICE CEO Alan Kirkland regarding a best interests test is available here.