Rates › Guides › Comparison rates
Guide
What a comparison rate is, and what it leaves out
A comparison rate folds a loan's interest rate and most of its fees into one figure on a standard $150,000 loan over 25 years. How it is calculated, why it can sit below the advertised rate, and when it is the wrong number to compare.
The rule
Every advertisement for a consumer credit product in Australia that states an interest rate must also state a comparison rate. The requirement comes from the National Credit Code, Schedule 1 to the National Consumer Credit Protection Act 2009. The comparison rate is calculated on a standard example: a $150,000 loan over 25 years with principal and interest repayments, including the interest rate and most upfront and ongoing fees.
The idea is simple. Two loans with the same interest rate can cost different amounts once an application fee, a monthly service fee or a package fee is added. The comparison rate puts those costs into the rate so the two figures can be compared on one line.
What goes in
The interest rate, including any discount that applies for the life of the loan. Establishment and application fees. Ongoing account or package fees. For a fixed or introductory rate, the rate the loan reverts to when the fixed or introductory period ends, for the rest of the 25 years. That last point is why a two-year fixed loan at 5.5% can carry a comparison rate near 6.5%: 23 of the 25 years are priced at the revert rate.
What stays out
Government charges such as stamp duty and mortgage registration. Fees that depend on how you use the loan, such as redraw fees, early repayment or break costs, and late payment fees. Fee waivers that are not guaranteed. Lenders mortgage insurance. And the benchmark itself: a $150,000 loan over 25 years is far smaller than most Australian home loans today, so a fixed-dollar fee weighs more in the comparison rate than it would on a $600,000 loan, and a rate discount tied to loan size may not show at all.
Why a comparison rate can be lower than the advertised rate
Some lenders publish an undiscounted reference rate as the advertised rate and price the comparison rate on the discounted rate most borrowers actually receive. On this site such a product is marked as net of discount, and the lender's page shows both figures. A comparison rate below the advertised rate is a signal to read the product's tiers, not a mistake.
When to use it, and when not to
The comparison rate is the right number for comparing two variable principal-and-interest loans of a size near the benchmark with ordinary fees. It is a weaker guide for a fixed-rate loan (most of the figure is the revert rate, which you may never pay if you refinance at the end of the term), for a large loan (fees matter less than the figure implies), for interest-only loans (the benchmark assumes principal and interest), and for a loan whose value to you lies in a feature the rate does not price, such as an offset account.
Deposit products have no comparison rate. A savings account or term deposit is compared on its rate, its conditions and its balance band, which the savings and term deposit guide explains.
Where to see it
Every home loan, personal loan and credit card on this site shows the comparison rate its lender published beside the advertised rate, on the market pages and on each product's page, with the tier it belongs to. The lender's own published figure is used; the site never computes a comparison rate of its own.
Home loan rates · Personal loan rates · How to read a home loan rate table