Non-Bank Lenders and ASIC Best Interests Duty: A 2026 Mortgage Broker Guide for Australian Borrowers

The Australian mortgage market is undergoing a structural shift. Non-bank lenders — once considered alternative providers for borrowers who could not qualify with major banks — have become mainstream partners for mortgage brokers, with non-ADI mortgage volumes growing by 25.3% in 2025 compared to just 3.9% growth for major banks.

At the same time, the Australian Securities and Investments Commission (ASIC) has launched its first industry-wide monitoring exercise on the Best Interests Duty (BID) for mortgage brokers, signalling a new era of regulatory scrutiny. Understanding both developments is essential for any Australian looking to purchase, refinance, or invest in property in 2026.

Understanding Non-Bank Lenders in Australia

Non-bank lenders are financial institutions that provide home loans and other credit products but are not Authorised Deposit-taking Institutions (ADIs) — that is, they do not hold banking licences and do not take deposits from the public. They fund their lending through wholesale capital markets, securitisation, and institutional investors rather than customer deposits.

In Australia, non-bank lenders include well-known names such as Pepper Money, Liberty Financial, La Trobe Financial, and Resimac, among many others. They are regulated by ASIC under the National Consumer Credit Protection Act 2009 (NCCP Act) and must hold an Australian Credit Licence (ACL). However, they are not subject to APRA''s prudential standards, which gives them greater flexibility in their lending criteria.

Why Non-Bank Lenders Are Growing

The rapid growth of non-bank lenders reflects a structural gap in the market created by the tightening of major bank lending criteria. As APRA has imposed debt-to-income (DTI) caps and maintained the 3% serviceability buffer, many creditworthy borrowers — including the self-employed, those with complex income structures, and property investors — have found it increasingly difficult to qualify with major banks.

Non-bank lenders fill this gap by offering more holistic underwriting. Rather than applying rigid "tick-box" criteria, they assess the full picture of a borrower''s financial situation, including alternative income verification, non-standard employment arrangements, and specialist security types. The Reserve Bank of Australia (RBA) noted in March 2026 that non-bank lenders account for approximately 6% of total financial system assets — a figure that is growing steadily.

Key Considerations When Using a Non-Bank Lender

Non-bank lenders offer genuine advantages for many borrowers, but they also come with important differences from major bank products that you should understand before proceeding.

• Interest rates — Non-bank lenders typically charge higher interest rates than major banks to reflect the higher risk profile of their borrower base and their higher cost of funds. However, rates vary significantly between lenders and products, and a mortgage broker can identify competitive options.
• Fees and charges — Non-bank products may carry higher establishment fees, ongoing fees, or early repayment charges. Always compare the comparison rate — which includes fees — rather than the headline interest rate alone.
• Loan features — Not all non-bank products offer the same features as major bank loans. Offset accounts, redraw facilities, and split loan options may be limited or unavailable on some non-bank products.
• Funding risk — Because non-bank lenders fund their loans through wholesale markets, they can be more sensitive to changes in wholesale funding costs. In periods of market stress, non-bank lenders may reprice their variable rate loans more quickly than major banks.
• Refinancing pathway — Many borrowers use a non-bank lender as a stepping stone — for example, to consolidate debt or establish a credit history — before refinancing to a major bank at a lower rate. A mortgage broker can help you plan this pathway from the outset.
• Dispute resolution — Non-bank lenders must be members of the Australian Financial Complaints Authority (AFCA), which provides free, independent dispute resolution for credit complaints. Confirm your lender''s AFCA membership before proceeding.

ASIC Best Interests Duty: What Borrowers Must Know

The Best Interests Duty (BID) for mortgage brokers was introduced under the National Consumer Credit Protection Act 2009 and has been a legal requirement since 2021. In 2026, ASIC launched its first specific monitoring exercise to assess how brokers are complying with the duty in practice.

The BID requires mortgage brokers to act in the best interests of their clients when providing credit assistance. This means the broker must prioritise the client''s interests over their own — including over the interests of the lender or aggregator. The duty is supported by a conflict priority rule, which requires brokers to resolve any conflicts of interest in favour of the client.

What ASIC Is Looking For

ASIC''s 2026 BID monitoring exercise is reviewing how brokers document their recommendations, how aggregators supervise their broker networks, and whether the products recommended are genuinely in the client''s best interests. ASIC is using access to reportable situations, misconduct reports, and dispute resolution data to refine its oversight.

Aggregators have been provided with data dictionaries to ensure consistent reporting across the industry, particularly regarding product recommendations. ASIC is paying particular attention to whether brokers are recommending non-bank products with higher rates and fees when lower-cost alternatives are available and suitable for the client.

Common Mistakes and Red Flags

When working with a mortgage broker in 2026, be alert to the following red flags that may indicate the broker is not acting in your best interests.

• Recommending a product without explaining why — A broker acting under the BID must be able to explain why the recommended product is in your best interests. If a broker cannot articulate a clear reason for their recommendation, ask for a written explanation.
• Steering you toward a lender without comparing alternatives — A broker should compare products from a panel of lenders — including both bank and non-bank options — before making a recommendation. Ask how many lenders are on the broker''s panel and whether the panel includes non-bank lenders.
• Failing to disclose commissions — Mortgage brokers receive upfront and trail commissions from lenders. These must be disclosed in the Credit Guide and Credit Proposal Disclosure document. If a broker does not proactively disclose their commissions, ask for full disclosure in writing.
• Recommending a non-bank product when a bank product is suitable — Non-bank products are appropriate for borrowers who cannot qualify with major banks or who have specific needs that non-bank products address. If you can qualify with a major bank at a lower rate, a broker recommending a non-bank product should provide a clear justification.
• Not explaining the comparison rate — The comparison rate includes fees and charges and provides a more accurate picture of the true cost of a loan. A broker who focuses only on the headline interest rate may not be giving you the full picture.

Australian Regulatory Context

Mortgage brokers in Australia are regulated by ASIC under the NCCP Act. They must hold an ACL or be a credit representative of an ACL holder. The Mortgage and Finance Association of Australia (MFAA) and the Finance Brokers Association of Australia (FBAA) are the two peak industry bodies, and membership of either provides an additional layer of professional accountability.

The Best Interests Duty applies to all credit assistance provided by mortgage brokers, including recommendations to use a non-bank lender. ASIC''s 2026 monitoring exercise is the first systematic review of BID compliance since the duty was introduced, and its findings are expected to inform future regulatory guidance and enforcement action.

The Australian Financial Complaints Authority (AFCA) handles disputes between borrowers and mortgage brokers or lenders. If you believe your broker has not acted in your best interests, you can lodge a complaint with AFCA at no cost. AFCA can award compensation of up to $1.085 million for credit-related disputes.

From 10 June 2025, Buy Now Pay Later (BNPL) providers are required to hold an ACL, bringing them under the same credit regulatory framework as other lenders. This change is relevant for borrowers who use BNPL products, as these commitments are now assessed as part of a borrower''s credit obligations when applying for a home loan.

Questions to Ask Your Mortgage Broker

Before engaging a mortgage broker, ask these targeted questions to assess their expertise and ensure they are acting in your best interests:

1. How many lenders are on your panel, and does your panel include non-bank lenders?
2. Why are you recommending this specific product, and how does it compare to alternatives from other lenders?
3. What commissions will you receive from the recommended lender, and how does this affect your recommendation?
4. What is the comparison rate for the recommended product, and how does it compare to the headline rate?
5. If I use a non-bank lender now, what is the pathway to refinancing to a major bank in the future?
6. Are you a member of the MFAA or FBAA, and are you registered on the ASIC Credit Register?
7. How will you document your recommendation to demonstrate compliance with the Best Interests Duty?

How MyMoney® Can Help

Navigating the Australian mortgage market in 2026 — with its expanding non-bank sector, tightening bank criteria, and heightened regulatory scrutiny — requires the guidance of an experienced, compliant mortgage broker. The right broker can access a wide panel of lenders, compare products objectively, and document their recommendation in a way that genuinely reflects your best interests.

MyMoney® connects Australian borrowers with licensed mortgage brokers who are committed to transparency, compliance, and client-first advice. Post a Brief on MyMoney® to describe your borrowing needs and receive tailored proposals from experienced brokers. You can also Browse Mortgage Brokers on MyMoney® to compare credentials, lender panels, and client reviews before making your choice.

Whether you are purchasing your first home, refinancing an existing loan, or investing in property, the right mortgage broker can make a significant difference to the outcome — and to your long-term financial wellbeing.