Sarah ThompsonAustralia's mortgage brokers are now under closer regulatory scrutiny than at any point since their legal obligations were reformed — and the findings may affect how borrowers choose and use their broker in 2026. The Australian Securities and Investments Commission announced at the Mortgage and Finance Association of Australia's Looking Ahead 2026 conference on 12 February 2026 that it had launched its first targeted review of the Best Interests Duty (BID) since the obligation began in 2021.
For borrowers currently in the market — or approaching a refinance — understanding what ASIC is checking can directly inform the questions you should be asking your broker right now.
What Is the Best Interests Duty, and Why Does It Matter?
The Best Interests Duty, which came into force in 2021, legally requires mortgage brokers to act in their clients' best interests when recommending a home loan. Before its introduction, brokers operated under a "not unsuitable" standard — meaning a product just had to not be wrong for you, not necessarily the best available option.
The BID was designed to close that gap. In practice, it means your broker must document why the lender and product they recommend is the right choice for you, not just a reasonable one. ASIC's 2026 review is the first time regulators have actively tested whether this obligation is being followed in practice.
According to ASIC's Regulatory Guide 273 on mortgage brokers' best interests duty, the duty includes acting honestly and efficiently, prioritising the client's interests, and identifying and managing conflicts of interest — including trailing commissions paid by lenders.
What ASIC Is Actually Examining
ASIC senior executive Nathan Bourne told the MFAA conference that the regulator wants to "make sure those frameworks are applied consistently and ultimately that they can be tested." The review focuses on four areas:
- The reasoning brokers document for their product and lender recommendations
- File quality and the completeness of BID compliance documentation
- How licensees supervise and monitor their broker networks
- Internal dispute resolution practices and complaints handling
The review began in mid-2025, with ASIC issuing data dictionaries to large aggregation groups to capture comparable information on broker recommendations. Findings are now being used to benchmark compliance across the industry.
The scale of what's being reviewed is significant. Mortgage brokers facilitated 77.3% of all new residential home loans by number in the September 2025 quarter — settling approximately $130.23 billion in new mortgages. That market dominance means BID compliance isn't a niche concern: it touches the majority of Australian home purchase and refinance transactions.
ASIC Enforcement: The Stakes Are Real
Since July 2019, ASIC action against finance and mortgage brokers has resulted in 11 criminal convictions, with a further 22 individuals or businesses subject to ongoing action. These are not just administrative penalties: criminal convictions carry serious professional and personal consequences.
The 2026 review is understood to be industry-wide rather than targeted at specific firms, but brokers who cannot demonstrate documented BID compliance — or whose aggregator's monitoring frameworks are inadequate — face regulatory exposure.
For borrowers, this enforcement context matters because it signals that the regulatory floor is real. An underperforming broker who fails to document their recommendations properly is not just cutting corners: they are operating outside their legal obligations.
5 Questions to Ask Your Mortgage Broker Before Signing
A legal expert can help you interpret a broker's response to these questions — particularly if you're refinancing, moving from a fixed to variable rate, or buying a property in a complex ownership structure.
1. Why is this lender the right choice for me, specifically? Your broker must be able to articulate why the recommended lender — not just the loan product — suits your financial situation, goals, and risk profile. Vague answers like "they have good rates" are insufficient under BID.
2. What other lenders did you consider, and why were they ruled out? BID compliance requires brokers to consider a range of options. If your broker cannot name the alternatives assessed and explain why they were set aside, that's a red flag.
3. How is your brokerage paid, and does that affect this recommendation? Trailing commissions, upfront commissions, and volume bonuses from lenders are all potential conflicts of interest that brokers must disclose and manage. Ask for a clear breakdown.
4. Is this loan still appropriate if interest rates rise further? A genuine best-interests assessment should include stress-testing your borrowing capacity against rate increases. If your broker hasn't raised this scenario, raise it yourself.
5. Can I see the documentation supporting this recommendation? ASIC's review specifically examines file quality. A compliant broker should be able to provide you with a summary of the reasons their recommendation meets BID requirements. If documentation is unavailable, that warrants scrutiny.
When Legal Advice Adds Value
Most Australians trust their mortgage broker's recommendation without independent review. In many cases, that trust is warranted — but ASIC's 2026 review confirms that compliance is not uniform across the industry.
For borrowers navigating complex lending scenarios — self-managed super fund loans, trust structures, cross-collateralisation, or refinancing with equity release — a legal expert can review your broker's recommendation and the underlying loan documents before you commit. This is particularly relevant when the gap between the recommended product and other available options is difficult to assess without specialist knowledge.
See also: CBA's AI mortgage fraud scandal and what it means for Australian homeowners — an earlier case illustrating how mortgage borrowers can be exposed by systemic failures in the lending process.
Expert Zoom connects Australian borrowers with legal professionals who specialise in finance and credit law — independently of any bank or lender.
This article provides general information about mortgage broker regulation in Australia. It does not constitute legal or financial advice. If you have concerns about a specific mortgage recommendation, consult a licensed legal professional.
