What is a comparison rate?
A comparison rate is a standardised percentage figure that combines a loan's interest rate with applicable fees and charges, required by law in Australia to allow borrowers to compare different loan products on an equal basis.
The comparison rate bundles the interest rate of a home loan with all the fees and charges attached to it into a single percentage figure. It exists specifically to help borrowers compare different loan products fairly, because an interest rate alone does not tell the full cost story. Two loans with the same interest rate can have very different total costs depending on application fees, annual fees, settlement fees, and other charges.
Australian law requires mortgage lenders and brokers to display the comparison rate alongside the advertised interest rate. This standardisation means that when you see a comparison rate quoted for a loan product, it has been calculated the same way as every other loan on the market, using a consistent formula set out by the industry regulator.
The comparison rate matters because it reveals the true cost of borrowing over the life of the loan. A loan with a lower interest rate but high upfront fees might actually cost more overall than a loan with a slightly higher rate and lower fees. When speaking with a mortgage broker, the comparison rate is your key tool for cutting through different loan offers and making a genuine apples-to-apples assessment. For large loan amounts on the Gold Coast, even small differences in the comparison rate can add up to thousands of dollars over a 25 or 30-year term.