The Morrison Liberal government’s proposed Consumer Credit Protection Amendment (Mortgage Brokers) Bill 2019 contains a new best interests duty obligation on mortgage brokers but not on lenders.
The application of this test would require mortgage brokers to ensure their conduct meets the standard of 'acting in the best interest of their customers' by at least assessing whether the incumbent lender is still offering the borrower a fair and reasonable deal.
Lenders often change their benchmark interest rates which impact existing customers whilst offering new customers ever increasing discounts and cashback offers. What may have been competitive yesterday can be uncompetitive today.
The ‘best interest duty’ will wrack havoc in the current lender discriminative interest rate discounting in favour of new borrowers (aka acquisition specials, special deals, spring specials) at the expense of loyal customers; and hopefully it will lead to more transparent interest rate pricing.
If legislated, the ‘best interest duty’ will be the best and most powerful gift by the Morrison Liberal government to the consumer that was born out of the Royal Banking Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
About time.