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Why the comparison rate isn’t a good comparison anymore

The comparison rate is a handy tool, but counting on it could see you paying too much.

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We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder .

When you’re comparing home loans, the headline interest rate only tells part of the story. While a low interest rate can help you save serious money on your loan, a low-rate loan with hefty fees can eat up these savings in the long run.

This is where a comparison rate comes in. A comparison rate takes into account a home loan’s headline interest rate as well as the accompanying fees and expresses these as a single annual percentage. This is a much better tool for determining the true cost of a home loan.

There’s one major problem with comparison rates, though. The way they’re calculated is light-years away from what you’re likely to experience with your home loan.

In 2003, the Australian government made it mandatory for lenders to display comparison rates in their advertising. The idea was that displaying a uniformly calculated comparison rate would help consumers suss out the cost of the various loan products in the market.

A lot has changed since 2003.

As per the government’s guidelines, advertised comparison rates are all calculated on the same loan amount and term. The problem with this is that house prices have skyrocketed since 2003. Meanwhile, the way advertised comparison rates are calculated hasn’t changed.

Advertised comparison rates are based on a $150,000 loan over a 25-year term. With the median capital-city dwelling price now above $630,000, it’s highly unlikely your home loan is going to fit these criteria.

As we’ll find out below, changing the terms of a loan can have a significant impact on the loan’s comparison rate. Let’s look at three comparison rates, all pulled from advertising by real lenders.

Advertised comparison rates

  • Lender A Comparison Rate: 3.72%
  • Lender B Comparison Rate: 3.74%
  • Lender C Comparison Rate: 3.81%

We visited each lender’s website to find out how this comparison rate would change under more realistic borrowing circumstances. Fortunately, by law, lenders must provide you a document known as a Key Facts Sheet when you’re applying for a home loan. This document will give you the comparison rate for your specific borrowing amount and loan term. We entered our own info to generate Key Facts Sheets for each of the lenders.

To get a better picture of how different factors can influence a comparison rate, we generated Key Facts Sheets based upon the median Sydney dwelling value of $880,000 and a 10% deposit, leaving a loan amount of $792,000.

When we entered this information on each lender’s website, the results were surprising.

Actual comparison rates

  • Lender A Comparison Rate: 3.79%
  • Lender B Comparison Rate: 3.74%
  • Lender C Comparison Rate: 3.78%

After entering these figures for each lender, we found the lender with the cheapest advertised comparison rate actually became the most expensive. Meanwhile, the lender with the most expensive advertised comparison rate actually became cheaper under these criteria.

While the difference in the comparison rates above might seem insignificant, this small change can add up over the life of your loan. Over the course of a 30-year loan term, the total amount you would pay for Lender A’s product would be $1,328,418.80. The total amount for Lender B would be $1,318,818, and the total amount for Lender C would be $1,324,861.40.
The loan with the most expensive advertised comparison rate ends up being $3,557.40 less expensive than the loan with the least expensive advertised comparison rate. Meanwhile, the loan in between the two ends up a whopping $9,600.80 less expensive.

The reasons for this can vary. Some home loans incentivise higher borrowing amounts with lower interest rates. Others might incentivise lower loan-to-value ratios and charge higher rates to borrowers with a smaller deposit. A longer loan term can also add to the total amount of interest you pay.

With this in mind, it pays to generate your own Key Facts Sheet for your expected borrowing amount with lenders you’re considering. The advertised comparison rate can be a helpful tool when you’re considering home loans, but if you don’t take the time to dig a bit deeper, you could end up paying thousands more.

Ready to compare home loan rates? Check out today's rates in the table below

Data indicated here is updated regularly
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Loan type
Repayment type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
2.49%
2.49%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
2.54%
2.56%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
Athena Celebrate Home Loan - 60% LVR  Owner Occupier, P&I
2.34%
2.34%
$0
$0 p.a.
60%
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
2.29%
2.72%
$0
$8 monthly ($96 p.a.)
95%
Up to $3,000 refinance cashback.
A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.
homeloans.com.au Low Rate Home Loan with Offset - LVR Under 60% (Owner Occupier, P&I)
2.29%
2.31%
$0
$0 p.a.
60%
A competitive rate with no application or ongoing fee. This loan is not available for construction.
HSBC Home Value Loan - Promotional Offer (Owner Occupier P&I)
2.59%
2.60%
$0
$0 p.a.
80%
Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online.
Yard Variable Home Loan - LVR 80% Special (Owner Occupier, P&I)
2.39%
2.42%
$0
$0 p.a.
80%
A very low variable rate loan for home buyers with an optional offset account ($10 monthly fee). 20% deposit required.
Well Home Loans Balanced Variable - LVR 80% Special Offer (Owner occupier, P&I)
2.17%
2.20%
$250
$0 p.a.
80%
A very low interest rate for home buyers with 20% deposits saved. Add an offset account for a small fee. This special discount rate is available for new borrowers who apply and get approved by 30 November 2020. Not available for construction purposes.
Virgin Money Reward Me Variable Home Loan - LVR ≤ 60% (<$500k Owner Occupier, P&I)
2.64%
2.81%
$300
$10 monthly ($120 p.a.)
60%
$3,000 refinance cashback.
A variable rate loan for owner occupiers with a 40% deposit (or equity) borrowing under $500,000. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
2.44%
2.38%
$0
$0 p.a.
80%
A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.
IMB Budget Home Loan - LVR ≤80% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.61%
2.67%
$449
$0 p.a.
80%
A competitive variable rate for borrowers with 20% deposits saved. Available for NSW and ACT borrowers only.
Tic:Toc Live in 10% deposit Variable Rate - Principal & Interest
2.19%
2.20%
$0
$0 p.a.
90%
Get a very low interest rate and pay no application, settlement or valuation fees. Apply online for full approval in real time and add a 100% offset account for $10 a month.
Athena Evaporate Home Loan - 60% to 70% LVR  Owner Occupier, P&I
2.39%
2.36%
$0
$0 p.a.
70%
A low variable rate for owner occupiers with 30% deposits. No upfront or ongoing fees.
AMP Bank Professional Package Variable Rate Home Loan - $100,000 and above, LVR ≤ 80% incl. LMI (Owner Occupier, P&I)
2.59%
3.00%
$0
$349 p.a.
80%
Get a sharp rate with no application or settlement fee, a redraw facility and 100% offset account. Other fees and charges apply.
Macquarie Bank Basic Home Loan - LVR ≤ 60% (Owner Occupier, P&I)
2.49%
2.49%
$0
$0 p.a.
60%
A competitive variable rate home loan for owner-occupiers. Requires a 40% deposit.
IMB Budget Home Loan - Special LVR  ≤90% (Owner Occupier, P&I, NSW and ACT borrowers only)
2.78%
2.84%
$449
$0 p.a.
90%
NSW and ACT customers only. You can get an interest rate discount for a limited time with this competitive variable mortgage.
Yard Variable Home Loan - LVR 90% (Owner Occupier, P&I)
2.65%
2.68%
$0
$0 p.a.
90%
A competitive variable rate for home buyers with 10% deposits saved. Optional offset account (with $10 monthly fee).
Bankwest Complete Home Loan Package Variable - $200k to <$750k LVR ≤80% (Owner Occupier, P&I)
2.73%
3.18%
$0
$395 p.a.
80%
A low variable rate loan with a 100% offset account and package discounts.
Sydney Mutual Bank Special Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.28%
2.86%
$250
$0 p.a.
95%
A competitive fixed rate loan for home buyers. Available with a 5% deposit.
Macquarie Bank Basic Home Loan - LVR ≤ 80% (Owner Occupier, P&I)
2.64%
2.64%
$0
$0 p.a.
80%
Pay no application and ongoing fees and take advantage of split and redraw options.
homeloans.com.au Low Rate Home Loan with Offset - LVR 60% to 80% (Owner Occupier, P&I)
2.39%
2.41%
$0
$0 p.a.
90%
This loan offers a competitive variable rate and a 100% offset account to help save you on interest repayments. This loan is not available for construction.
Virgin Money Reward Me Fixed Rate Home Loan - 2 Year $300k+ Special offer (Owner Occupier, P&I)
2.29%
2.87%
$300
$10 monthly ($120 p.a.)
80%
$3,000 refinance cashback.
Buy your home and lock in a low rate for the first two years. Get a $3,000 cashback when you switch to Virgin Money with a loan amount of $300,000 or more with an LVR up to 80%. You must apply by 29 November 2020 and settle by 28 February 2021.
HSBC Home Value Loan - Promotional Offer LVR 90% (Owner Occupier, P&I)
2.69%
2.70%
$0
$0 p.a.
90%
A competitive value home loan with no ongoing fee.
Macquarie Bank Basic Home Loan - LVR ≤ 90% (Owner Occupier, P&I)
3.04%
3.04%
$0
$0 p.a.
90%
Borrow up to $750K with an LVR ≤ 90% and pay no application fee.
Heritage Bank Discount Variable Home Loan - LVR ≤ 80% (Owner Occupier, P&I) New Customers Only
2.78%
2.83%
$600
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
Bank of Melbourne Basic Home Loan - Special Offer (Owner Occupiers, P&I) LVR above 60% up to 80%
2.54%
2.56%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback
A competitive variable rate loan from Bank of Melbourne. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).
Bluestone Prime Direct (Owner Occupier, P&I)
2.49%
2.51%
$0
$0 p.a.
70%
Bluestone's Prime Direct is a competitive variable rate home loan for borrowers with 30% deposits.
BankSA Basic Home Loan - Owner Occupier, P&I
2.54%
2.56%
$0
$0 p.a.
80%
Up to $4,000 refinance cashback
A competitive variable rate loan from BankSA. Refinancers borrowing $200,000 or more can get a $4,000 cashback (Other terms, conditions and exclusions apply).
Heritage Bank Fixed Rate Home Loan - 2 Year Fixed Rate (Owner Occupier, P&I) New Customers Only
2.59%
4.30%
$600
$8 monthly ($96 p.a.)
95%
Get a partial offset account and the option to make interest-only repayments.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.41%
$395
$0 p.a.
80%
A competitive fixed interest rate loan with no ongoing fees. Requires a 20% deposit.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 2 Year Fixed (Owner Occupier, P&I)
2.44%
3.76%
$0
$395 p.a.
95%
$2,000 refinance cashback
Enjoy a discounted fixed rate and the ability to package the loan with other financial products. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
UBank UHomeLoan Variable Rate - Discount Offer for Investor Variable P&I Rate
2.89%
2.89%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
G&C Mutual Bank Momentum Home Loan - LVR <50% (Owner Occupier, P&I)
2.55%
2.57%
$0
$0 p.a.
A variable rate loan for owner-occupiers looking to refinance. This loan has low fees and a 100% offset account.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.44%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
Athena Variable Home Loan - Owner Occupier, IO
2.99%
2.59%
$0
$0 p.a.
80%
Owner occupiers can refinance to one of the most competitive interest-only rates in the market. No application fee and no ongoing fees.
Heritage Bank Advantage Package - 1 Year Fixed (Owner Occupier, P&I) New Customers Only
2.59%
3.34%
$0
$350 p.a.
95%
Get a partial offset account and flexible repayments with this package loan.
Newcastle Permanent Building Society Real Deal Home Loan - Special Offer 1 (Owner Occupier, P&I)
2.59%
2.63%
$595
$0 p.a.
80%
$2,000 refinance cashback
$2,000 cashback for eligible refinancers borrowing $250,000 or more.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
2.68%
2.69%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, QLD and ACT only.
IMB Fixed Rate Home Loan - 3 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
2.39%
3.08%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 3 years fixed interest terms and free access to redraw facility online. Available with a 10% deposit.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, IO)
2.44%
2.85%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.54%
3.98%
$595
$0 p.a.
95%
$2,000 refinance cashback
Borrow up to 95% LVR of the value of the property you're buying and pay no ongoing fees. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
CUA Achieve Variable Home Loan - $500k+ (Owner Occupier, P&I)
2.55%
2.60%
$600
$0 p.a.
95%
Home buyers can get a competitive, low-fee variable rate plus a 100% offset account. Low deposit option available. Eligible new home buyers with low deposits can apply for the First Home Loan Deposit Scheme with this lender and avoid LMI costs. Eligible refinancers can get a $2,000 pre-paid credit card when they switch to CUA.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, P&I)
2.14%
2.46%
$395
$0 p.a.
80%
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.
IMB Fixed Rate Home Loan - 3 Years Fixed (LVR ≤90% Investor, P&I, NSW and ACT borrowers only)
2.64%
3.56%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. A 3 years fixed rate investor which allows extra repayments to be made.
Hunter United Fixed Home Loan - 2 Year Fixed (Owner Occupier, P&I)
2.19%
2.71%
$350
$0 p.a.
90%
Lock in a competitive rate for two years. Available with a 10% deposit.
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Year (Owner Occupier, P&I)
2.29%
3.53%
$0
$395 p.a.
95%
Up to $3,000 refinance cashback.
Competitive fixed rate loan available with a 5% deposit. Eligible borrowers refinancing $250,000 or more can get up to $3,000 cashback. Other conditions apply.
Endeavour Mutual Bank Special Fixed Home Loan - 3 Year (Owner Occupier, P&I)
2.28%
2.86%
$250
$0 p.a.
95%
A competitive 3 year fixed rate loan for home buyers. Available with a 5% deposit.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer Discount 1 ($150k+ Owner Occupier, P&I)
2.94%
3.34%
$0
$395 p.a.
95%
$2,000 refinance cashback
New borrowers or refinancers can get a discounted rate with this package loan. $2,000 cashback for eligible refinancers borrowing $250,000 or more.
IMB Fixed Rate Home Loan - 2 Year Fixed (LVR 90% Owner Occupier, P&I, NSW and ACT borrowers only)
2.19%
3.10%
$449
$6 monthly ($72 p.a.)
90%
NSW and ACT customers only. 2 years fixed interest terms and free access to redraw facility online. Available with a 5% deposit.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, IO)
2.29%
2.47%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, P&I)
2.29%
2.84%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
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Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

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