What is best interests duty (BID)?

Best interests duty came into force on 1 January 2021 under the National Consumer Credit Protection Amendment Regulations 2020. It requires mortgage brokers in Australia, including those operating in Perth, to prioritize the client's needs above all else when recommending home loans and lenders.

Under this obligation, a broker must conduct reasonable inquiries into the client's financial situation, objectives, and constraints before making any recommendation. The recommendation itself must be based on that information and represent what the broker believes to be in the client's best interests at that time. This means the loan suggested should align with the borrower's capacity to repay, their timeframe, and their specific circumstances, not simply the loan that generates the highest commission for the broker.

In practice, BID means brokers must document their assessment process, show their reasoning for each recommendation, and avoid steering clients toward unsuitable products. It applies whenever a broker provides personal financial advice or makes a loan recommendation. Brokers who breach this duty can face penalties from regulators and complaints through the Australian Financial Complaints Authority.

The duty represents a shift toward greater accountability in mortgage broking. Clients in Perth and across Australia can expect their broker to demonstrate how a recommended loan matches their circumstances, and to disclose any conflicts of interest that might influence their advice. When selecting a mortgage broker, understanding that BID compliance is a baseline expectation helps consumers identify providers committed to transparent practice.