What is a comparison rate on a home loan?

The direct answer

A comparison rate is a single interest rate figure that combines the loan's interest rate with most ongoing fees and charges, expressed as an annual percentage. It is designed to help borrowers compare the true cost of different loans — a loan with a low headline rate but high fees may have a higher comparison rate than a loan with a slightly higher rate and no fees.

How is the comparison rate calculated?

In Australia, comparison rates are calculated on a standard loan of $150,000 over 25 years. This standardisation allows loans to be compared on a like-for-like basis. The calculation includes the interest rate, application fees, and ongoing monthly fees — but does not include government charges (stamp duty, mortgage registration), redraw fees, early exit fees, or offset account fees.

Because comparison rates are calculated on a $150,000 loan, they are more useful for comparing smaller loans. For larger loans (the typical Adelaide home loan), the fees represent a smaller proportion of the total cost, so the comparison rate is less relevant than for smaller loans.

What the comparison rate does not include

The comparison rate does not include: government fees and charges; offset account features (a good offset account can be worth more than a lower rate on large loans); early repayment fees or break costs; cashback offers; or features like unlimited redraws or additional repayments.

This is why Lendology evaluates loans holistically — comparing rate, comparison rate, features, cashback, lender policy and offset functionality — rather than relying solely on the comparison rate.

Common questions

Frequently asked questions

Should I always choose the loan with the lowest comparison rate?

Not necessarily. The comparison rate is a useful starting point but does not capture offset account features, cashback offers, or lender service quality. Lendology evaluates all factors before recommending a loan — not just the headline or comparison rate.

Why is the comparison rate different from the interest rate?

The interest rate is the base rate applied to your loan balance. The comparison rate adds ongoing fees to give a more complete picture of the true annual cost. A loan with a 5.80% rate and $300 annual fee has a higher comparison rate than a loan with a 5.80% rate and no fee.

Is a comparison rate the same as an APR?

The Australian comparison rate is similar in concept to the APR (Annual Percentage Rate) used in other countries, but the calculation methodology differs. In Australia, comparison rates are standardised on a $150,000, 25-year loan.

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The information on this page is general in nature and does not constitute financial advice. Given Finance Pty Ltd (t/a Lendology) ACN 624 144 501 is authorised under LMG Broker Services Pty Ltd ACL 517192.