What is a comparison rate?

A comparison rate is a standardised percentage that bundles the advertised interest rate with fees and other costs into one figure. This makes it easier to compare mortgages across different lenders, because the advertised interest rate alone does not tell the full story of what you will actually pay.

Lenders must include fees such as application fees, valuation fees, and ongoing loan account fees when calculating the comparison rate. The result is always higher than the advertised interest rate because it reflects the total cost you face over the loan term. For example, a loan with a lower interest rate but high fees might have a higher comparison rate than a competitor's offer with a slightly higher interest rate but lower fees.

In Australia, lenders are legally required to display the comparison rate alongside the advertised rate in all advertising and promotional materials. This requirement exists to protect borrowers from making decisions based on incomplete information. When speaking with a mortgage broker, always ask for the comparison rate so you can make an informed choice between different loan products.