A non-bank has called for lenders to provide brokers with clearer policy information and stronger scenario support as ASIC scrutinises the justification for higher-cost loan recommendations.
Brighten Home Loans’ head of sales and distribution, Chris Meaker, has called for lenders to strengthen policy guidance, scenario support, and service information, as the Australian Securities and Investments Commission’s (ASIC) best interests duty (BID) review puts the justification for higher-cost mortgage recommendations under scrutiny.
His comments follow ASIC’s release of Report 840, Mortgage brokers: Review of best interests duty and complaints handling practices, on 13 October.
The review examined 13 credit licensees across eight large aggregator groups, collectively responsible for approximately two-thirds of Australia’s broker representatives, using data covering April 2023 to March 2025.
ASIC found that practices were generally aligned with its guidance, but identified weaknesses in loan recommendations, supervision and complaints handling.
Seven groups reported that the cheapest option was not recommended in more than 20 per cent of cases, with some recommendations lacking clear supporting evidence.
Meaker said that scrutiny increased the importance of lenders equipping their distribution networks with the information needed to explain recommendations beyond headline pricing.
“I think it’s very apparent that rate is just one of many factors when a broker has to determine where to place their customer,” he said.
“So rate isn’t often the most important, there [are] multiple reasons why a customer or broker comes to us, from a lender point of view, we’ve got to be armed with as much education and policy information, which will help the broker.
“Especially now when ASIC is scrutinising higher-priced recommendations more than ever, it comes down to brokers putting informative notes as to why they’ve gone and chosen that particular lender, and that is key.”
Policy and service need to support the recommendation
Meaker said understanding how a lender’s policy and processes applied to a transaction required close engagement with its business development team, particularly where borrowing structures or capacity narrowed the available options.
“That’s why brokers have to work so closely with their business development manager, they need to understand policy, understand the process, and there is a number of factors why a broker would use a lender, one is rate, but it could also be a factor of things like type of borrowing entity, borrowing capacity, that’s a huge one at the moment,” he said.
Meaker added that Brighten’s servicing proposition and speed attracted customers whose financing requirements could not necessarily be met by the lowest-priced alternative.
“We get a lot of customers coming to us because our servicing is a better proposition, speed to market is a huge one as well, customers may be very sensitive, or they may have very strict settlement clauses, finance clauses so going to a lender that offers the best rate, but they take three weeks to settle, it might not be appropriate for that borrower,” he said.
He also linked those transaction pressures to lenders’ responsibility to explain their capabilities, giving brokers a clearer basis for assessing whether a product could meet the customer’s requirements.
“That’s where we, as the lender, have to give as much information, policy niches, product information as much as possible,” he said.
“My key takeaway on the BID review is that the broker has to put detailed notes into why they’re going to that particular lender. If it’s not because of rate, what is the reason?”
Complex applications put lender engagement to the test
Meaker further outlined that lender education should involve working through individual applications with BDMs, rather than relying solely on general product information.
“Education is key, so workshopping, workshopping those particular complex scenarios with the business development team is paramount to making sure they’re giving the customers the right information,” he said.
“We have got no issue, no concern, we would actually rather do a face-to-face appointment and go through all the details of that particular complex scenario, cover off what we can offer.
“So I think lenders more than ever have to give as much information to that to the broker.”
Beyond the immediate application, Meaker said lender selection also depended on understanding where the customer’s financial circumstances and plans were heading.
“The broker also has to understand what the customer circumstances are now and what their future plans are. I think that will determine the kind of suitable lender to use,” he said.
Asked about considerations preceding rate comparisons for construction or bridging loans, Meaker focused on construction, where lender availability and project duration could significantly shape the assessment.
“There’s a lot of lenders out there who don’t even specialise in construction, so that makes the pool a little bit smaller in terms of the lenders that the broker can use,” he said.
“But again, you completely made the right remark there, how long is that construction going to take to finish off that project, and what is the revert rate going to be when the customer finishes their construction?”
Broader choice sharpens the need to explain value
Meaker said the broker channel’s growing scale and access to extensive lender panels meant customers had substantial choice, with the reasons for exercising that choice increasingly extending beyond rates.
“More than anything is we’ve now got a market where 82 per cent of home loans are completed by brokers, which is fantastic, and that’s rising,” he said.
“So more than ever, customers are getting more choice and flexibility about what lenders they can use.
“Aggregators have, you know, circa 60 plus lenders on their panel, so it comes back to choice, and that again isn’t just about interest rate; it’s about the choice and the reasons why they’ve chosen that particular lender.”
Illustrating the potential trade-off between price and capacity, Meaker described a hypothetical borrower seeking substantially more finance, while suggesting that another rate increase could be approaching.
“I think if interest rates do go up next week, which is looking likely again, so it might be 20 basis points cheaper somewhere else, but they might want to borrow another $200,000, so they’ll go to the other lender, so a really important factor is borrowing capacity more than ever at the moment,” he said.
Where pricing and products were closely matched, he said, assessment speed and service quality could provide a further distinction between lenders.
“I think service comes into play now more than ever as well and what I mean by service is, you could have three lenders who have got very, very similar products and very similar rates,” he said.
“But the opportunity is when you speak to your lenders, is how long would it take to assess the loan, what [are] the hurdles in front of that customer, and that’s another really good reason around BID is you’re choosing a lender purely because of service.”
[Related: Mortgage industry says cheapest isn’t always best after BID review]
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