A home loan comparison rate combines the interest rate with certain fees and charges in one annual percentage. It helps you compare the cost of similar loans on a common basis. It is not the rate used to calculate your repayments, a personalised quote or a complete measure of value.
Interest rate vs comparison rate
Your lender uses the interest rate to calculate interest on the outstanding loan balance. Your repayment also depends on the amount borrowed, term and repayment type.
The comparison rate includes that interest and certain charges, such as establishment and ongoing account fees. The gap between the two rates can flag extra costs, but fees are not the only explanation. A fixed or introductory loan can move to a different rate later.
Why the $150,000 example matters
Advertised home loan comparison rates commonly use a $150,000 secured loan over 25 years. This is the home-loan-sized example specified in the national credit regulations. Read the lender’s comparison-rate warning to confirm the amount, term and repayment basis.
A fixed dollar fee has a greater effect on a small loan than a large one. If you need $600,000, the advertised comparison rate will not tell you exactly what your loan costs. Ask the lender for figures based on your balance and term.
Fixed loans include an assumed rate after the fixed period
A fixed-loan comparison rate takes account of the rate the loan reverts to after the fixed period, using the assumptions that apply when the figure is calculated. That can explain a large gap between the advertised fixed rate and its comparison rate.
For example, a two-year fixed loan in a 25-year comparison includes the first two years and the remaining 23 years. It does not predict future variable rates or assume you will negotiate a discount or refinance. Ask what rate applies when the fixed period ends.
What a comparison rate leaves out
- Government charges and some costs that depend on what you do, such as early repayment or redraw fees.
- The savings you might get from an offset account, extra repayments or a fee waiver.
- Whether you meet the lender’s eligibility rules.
- Future changes to variable rates, fees or your circumstances.
A cashback or reward also needs its own assessment. Check its conditions and compare the cost of the loan beyond the initial offer.
A lower interest rate can still cost more
Consider two hypothetical variable loans with the same $150,000 balance, 25-year term and monthly principal-and-interest repayments. Loan A advertises 5.80% interest and a 6.10% comparison rate. Loan B advertises 5.90% interest and a 5.95% comparison rate.
Assuming no introductory periods or later rate changes, Loan A has the lower interest rate but the higher cost under the comparison calculation because of its included fees. These are illustrative advertised figures, not current offers or a personalised savings calculation. Excluded costs and useful features can change the choice.
How to compare using your own numbers
- Compare the same loan purpose, repayment type and remaining term. Extending the term can reduce repayments while increasing total interest.
- Ask for a Key Facts Sheet based on your intended loan amount. Check the interest rate, fees, repayments and total amount repayable.
- For a fixed or introductory loan, check what happens when the initial period ends.
- Include switching costs and the features you will actually use. Confirm the current terms with the lender before applying.
The Moneysmart mortgage calculator lets you test how changes to the amount, term and interest rate affect estimated repayments.
How to read Ratepool’s figures
In our home loan list, the comparison rate comes from the lender. It does not change to match the amount you enter. Estimated repayments use the displayed interest rate and your selected term, excluding fees and future rate changes.
Upfront and Annual show supported fee amounts separately. A dash means a supported figure is unavailable, not that there is no charge. Check our lender coverage and confirm the full cost and conditions with the lender.
Sources
- ASIC Moneysmart: Choosing a home loan
- Ubank: Everything to know about comparison rates, for included fees and revert rates.
- National Consumer Credit Protection Regulations 2010, regulations 97–100.
Sources checked 5 October 2026. The examples are illustrative and are not lender offers.
This article provides general information only. It does not consider your objectives, financial situation or needs.