Skip to content

Comparison rate: the number that actually matters

The comparison rate is a regulatory number required on every Australian home loan advertisement. It exists to stop lenders advertising a stripped-down headline rate while hiding fees that would push the effective rate higher. In 2026 it is still useful, but it does not mean what most borrowers think.

What the comparison rate includes

The calculation is based on the National Credit Code formula:

  • Loan amount $150,000
  • Term 25 years
  • Principal and interest repayments
  • Advertised rate + standard lender fees (application fee, ongoing monthly fee, settlement fee)

It does not include:

  • Government fees (stamp duty, registration)
  • Third-party costs (valuation, legal)
  • Optional features (rate lock, LMI)
  • Benefits you might actually receive (package discounts, cashback)

Why the $150k / 25-year assumption matters

The calculation is a fixed benchmark, not your actual loan. If you borrow $600k over 30 years, the comparison rate is directionally useful - the fees are amortised over a longer amount - but the exact figure doesn’t represent your true rate.

On a packaged $600k loan, the package fee ($395) is proportionally tiny (6.6 bps). On a $150k loan, the same package fee is 26 bps. That is why basic no-frills loans often show a lower comparison rate than packaged loans - at $150k, the package fees hurt, even if at $600k the package is a net saving.

What to actually compare

Build your own comparison:

  1. Advertised rate (after all retention and discount discussions)
  2. Your actual loan amount and term
  3. All annual ongoing fees (package, account keeping)
  4. Monthly or offset minimum balance requirements
  5. LMI if applicable, amortised over your planned holding period (not the full 30 years)
  6. Refinance friction: discharge fees, retirement of package benefits

This is the spreadsheet a broker or careful borrower builds before deciding between two products. The comparison rate helps filter the short list, but the decision itself needs the real numbers.

The one honest use of comparison rate

On small loans (under $200k), short terms (5-10 years), or heavily fee-loaded products, the comparison rate does approximate the true cost fairly well. On a typical $600k/30-year owner-occupier loan, the real rate spread is tighter than the comparison rate suggests.