Does the lender panel limitation affect the ability of mortgage brokers to recommend a suitable product to their clients?
Mortgage brokers are the point of contact for borrowers seeking a home loan and act as middlemen between borrowers and lenders. Brokers should also act in the best interests of their clients and recommend a loan product that best suits the client’s financial situation.
Who are the empanelled lenders for a mortgage broker?
In Australia, mortgage brokers (who belong to a specific aggregator) maintain relationships with lenders, which might include lending organisations ranging from top-tier banks to digital lenders and second-tier lenders.
While the aggregators provide the brokers access to a large panel of lenders, the lenders can be categorised based on their clients’ requirements.
The empanelled lenders might broadly include,
- Large banks
- Second-tier banks
- Non-bank lenders
- Lenders who need low documents
- Digital lenders
Can a broker recommend a loan product outside his / her panel?
As per the BID (Best Interest Duty), introduced in 2021, to protect borrowers’ best interests, mortgage brokers are required to provide a sufficient range of lender options.
But as a broker can only recommend loan products from the lender he/she is empanelled with, and are not allowed to submit applications directly to non-empanelled lenders. Rather, they should inform the borrowers and facilitate it.
What does BID (Best Interest Duty) have to say in this?
The regulations under BID state that if a broker finds a lender that best suits the borrower’s financial needs and the lender is not empanelled with them, the broker must disclose the panel’s limitations and refer the borrower to another broker or the most suitable lender channel.
How can a mortgage broker navigate these regulatory obligations?
Since the introduction of BID, ASIC has been conducting a post-implementation review since mid-2025 to understand how the brokers have been prioritising their clients’ requirements over their own.
The mortgage brokers are required to,
- Consider the client’s best interest while choosing a suitable lender
- Recommend loan products that are competitive and relevant
- Properly document why the recommendation is most appropriate
- If the loan product their client requires is not in their panel, the broker should disclose why the client can look for options outside the panel, as the borrower’s panel does not include the loan they are seeking. It is also done to avoid conflicts of interest during credit assistance.
- Explain to the client why the recommended loan option is competitive, appropriate and suits the client’s best interests
- The file notes (explaining consideration), comparison evidence, reason why the recommendation is made, and disclosure records have to be submitted to ASIC
How can outsourcing help?
Sundaram Business Services has over 12 years of experience supporting mortgage brokers and aggregators across Australia with our efficient back-office support. In times of high regulatory scrutiny that requires clear documentation, our support can assist brokers in focusing on providing the most suitable recommendation for their clients.
