When comparing home loans in Australia, it’s easy to focus on the headline interest rate — but that number alone doesn’t show the full picture. The comparison rate helps you understand the true cost of a home loan, taking into account both the interest rate and most fees you’ll pay over time.

What is a comparison rate?

A comparison rate combines the interest rate with common loan fees to give a clearer idea of what a home loan will actually cost.

Here’s how it breaks down:

  • Interest rate – The percentage you’re charged on your loan balance.
  • Fees – Includes upfront, ongoing, or annual costs associated with the loan.
  • Comparison rate – Combines both the interest rate and standard fees to show what you’ll actually pay overall.

So, while one lender might advertise a lower interest rate, another with slightly higher rates but lower fees could be cheaper overall once you account for the comparison rate.

Why comparison rates matter

Comparison rates are designed to make it easier to compare loans from different lenders. They help highlight the real cost of borrowing, beyond the advertised rate.

However, it’s important to remember that comparison rates are calculated on a $150,000 loan over 25 years. Since most Australian home loans are larger and span longer periods, use this figure as a guide rather than a guarantee.

How to choose the right loan

When comparing home loans:

  1. Look at both the interest rate and the comparison rate.
  2. Check the fees and features included in each loan.
  3. Consider your loan amount and term, as these will affect your actual costs.

 

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