What is a comparison rate?
Comparison rate: A comparison rate bundles a home loan's interest rate plus most upfront and ongoing fees into a single percentage, so you can compare the true cost of different loans. Australian credit law requires lenders to display it alongside any advertised rate.
Part of the Everstone mortgage glossary · Reviewed June 2026
How the comparison rate works
The advertised rate tells you what interest you'll pay; the comparison rate tells you what the loan costs once establishment fees, ongoing fees and the loan's structure are folded in. By law it's calculated on a standard example — a $150,000 loan over 25 years — which keeps lenders honest but also dates the benchmark: on a $650,000 loan, fixed-dollar fees hurt proportionally less than the comparison rate implies.
The gap between the two numbers is the tell. A loan advertised at 5.49% with a comparison rate of 5.92% is carrying meaningful fees; a gap of a few basis points means the headline rate is close to the real cost. Honeymoon offers are where the comparison rate earns its keep — a low intro rate that reverts to something expensive shows up immediately in the comparison figure.
What it doesn't capture
- Government charges (stamp duty, registration) and event-based fees like redraw or break costs.
- The value of features — an offset account inside a package can save you far more than the package fee that raises the comparison rate.
- Your actual loan size — ask for the figures personalised to your numbers rather than the statutory example.
The practical rule: use the comparison rate to screen out fee-heavy loans, then compare your genuine shortlist on total cost over your realistic horizon — something a broker can model on your actual loan size in minutes.
Common questions about comparison rates
Why is the comparison rate higher than the advertised rate?
Because it adds the loan's fees to the interest rate. The bigger the gap, the more fee-heavy the product.
Is the lowest comparison rate always the best loan?
No. It ignores feature value and your loan size. A slightly higher comparison rate with a genuinely useful offset can be cheaper in practice than the lowest-comparison-rate loan.
Do fixed-rate loans have comparison rates?
Yes, and they're particularly revealing there — the calculation includes the revert rate your loan rolls onto when the fixed period ends, which is where many fixed loans get expensive.
Related terms: Offset accounts · LVR · Full glossary
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