What is the Best Interests Duty for a mortgage broker?

Most borrowers have never heard of the Best Interests Duty, yet it is the single biggest reason using a broker is safer and more trustworthy than it used to be. It is a legal obligation that sits behind every recommendation a broker makes. Here is what it is and what it means for you.

What the Best Interests Duty is

The Best Interests Duty, often shortened to BID, is a legal obligation that has applied to mortgage brokers since 2021. In plain terms, it requires a broker to act in the best interests of the client when suggesting a loan. It is not a guideline or a code of conduct, it is a legal duty backed by the regulator.

Why it was introduced

It was introduced as a consumer protection, in part to address concerns that broker commissions could create a conflict of interest. The duty makes clear that, whatever a broker is paid, the recommendation must be the one that suits the client, which directly tackles the fear that a broker might chase the highest commission.

What it means in practice

In practice, the duty means a broker must recommend a loan that genuinely suits your situation and goals, not the one that pays them the most. Because commission is broadly standardised across lenders anyway, and because the law requires your interests to come first, the recommendation should be driven by what is right for you.

It covers conflicts

The duty is most powerful where the broker interest and yours might diverge. A clear example is refinancing: if switching loans is genuinely in your interest but would cost the broker a clawback of their commission, the Best Interests Duty still requires the broker to recommend the switch. Your interest takes priority over their pay.

Disclosure goes with it

Alongside the duty, brokers must disclose how they are paid. You generally receive documents, commonly a Credit Guide and a Credit Proposal, setting out the remuneration, and you can ask for the exact figure on a recommended loan. Transparency and the duty work together to protect you.

It applies to brokers specifically

It is worth knowing that the Best Interests Duty applies to mortgage brokers. The staff in a bank branch, who work for that bank, are not under the same duty to act in your best interests, they are there to offer their employer products. This is a meaningful distinction when you are choosing how to get your loan.

What it means for you

For you, the duty means the advice you get from a broker has a legal obligation behind it. You are entitled to understand how a recommendation meets your interests, and it is perfectly reasonable to ask your broker to explain why the loan they suggest is right for your situation.

The bottom line

The Best Interests Duty is a genuine protection that reshaped broking. It is the reason the common fears about hidden bias are largely out of date, and it is a strong reason that, for most borrowers, using a broker is a safe way to get advice and compare the market.