A comparison rate is designed to represent a closer estimate of the total cost of a loan per year. It is expressed as an annual percentage rate and includes the loan’s interest rate as well as most upfront and ongoing fees and charges. Lenders are legally required to show customers a comparison rate alongside a product’s interest rate.

What is the difference between the interest rate and the comparison rate?

The interest rate reflects how much interest you will be charged per year on the balance of your loan. This affects your monthly repayments

The comparison rate, on the other hand, combines the interest rate plus most fees and charges that come with the loan. This is designed to help you identify the cost of the loan more accurately and make it easier to compare products.

How are comparison rates calculated?

Home loan comparison rates are calculated based on a $150,000 loan, over a 25-year loan term. Comparison rates take into account:

• Interest rate (including any revert rate that applies to the loan after a set period of time)
• Fees and charges (including upfront costs like establishment fees and valuation fees and ongoing costs such as monthly or annual fees)
• Repayment frequency