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What is a home loan comparison rate?
If you’ve ever found yourself asking ‘what’s a comparison rate?’, then we’re here to explain this important piece of home loan terminology and how it works.
11 June 2025
If you’ve ever found yourself asking ‘what’s a comparison rate?’, then we’re here to explain this important piece of home loan terminology and how it works.
Key points:
- The comparison rate of a home loan is an estimate of how much it could cost you each year.
- A comparison rate takes into account the cost of interest as well as fees and charges.
- Lenders are legally required to show customers the comparison rate of a loan alongside the interest rate.
What is a home loan comparison rate?
A home loan comparison rate is an estimate of how much a loan could cost you each year when interest, as well as most ongoing fees and charges, are added up. Lenders are legally required to show customers a comparison rate alongside a product’s interest rate. The comparison rate is expressed as an annual percentage rate.
What is the difference between the home loan interest rate and the home loan comparison rate?
- The interest rate reflects how much interest you will be charged per year on the balance of your loan, whether your loan is at a fixed or variable rate. This will give you an idea of your monthly repayments.
- The comparison rate combines the interest rate plus most fees and charges that come with the loan. This is designed to help you identify the cost of the loan more accurately and make it easier to compare products.
How is a comparison rate calculated?
Home loan comparison rates are calculated based on a $150,000 loan, over a 25-year loan term. Comparison rates take into account a loan’s:
- interest rate (including any revert rate that applies to the loan after a set period of time)
- fees and charges (including upfront costs like establishment fees and valuation fees and ongoing costs such as monthly or annual fees)
- repayment frequency
An example of how comparison rates are displayed can be seen in Canstar’s comparison tables.
The comparison rate should be used as a guide only, to compare ‘like for like’ products. This is because the average mortgage size in Australia is much higher than $150,000. As well as that, your home loan may be longer or shorter than 25 years.
The comparison rate also does not take into account all fees and charges related to a loan. For example, it does not include fees and charges that are incurred in specific circumstances, such as early repayment fees and redraw fees. It also does not consider potential cost saving options such as fee waivers and offset accounts.
Additionally, it does not include external government fees and charges that usually apply to purchasing a property, such as stamp duty.
Does the comparison rate make a big difference?
The comparison rate for a loan can reveal quite a difference in costs between two loans that have the same advertised interest rate. If you were just considering interest rates, you might think two loans cost the same. But the comparison rate can help to reveal whether one loan costs more than the other.
Choosing the best possible loan for your situation could mean thousands of dollars saved in fees over the years. Checking the comparison rate can help you to choose a loan with an overall annual cost you can afford. However, be aware that a more expensive loan may offer different features, such as an offset account, redraw facility or portability, which may contribute to its overall value.
Where do you find the comparison rate?
Lenders are legally required to display comparison rates whenever they advertise a home loan interest rate. For example, you may see a home loan advertisement with the text: Variable interest rate 3.29%, comparison rate 3.70%, based on a loan of $150,000 over 25 years. Lenders must also include a comparison rate warning about the accuracy of the comparison rate.
Another helpful place to look is the key facts sheet, where the lender should specify information including the comparison rate meaning, the interest rate and the total amount to be paid back over the life of the loan.
Canstar lists the comparison rate alongside the advertised interest rate for each loan in our comparison tables. We also enable consumers to sort home loan products by comparison rate. You can find comparison rates on home loans for various purposes:
Lenders must also display comparison rates for personal loan and car loan products (however, these rates are based on different loan amounts and loan terms). Canstar also displays comparison rates and interest rates for these products.
Compare Home Loans (Refinance with variable rate only) with Canstar
If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for homeowners looking to refinance. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest to highest). Products shown are principal and interest home loans available for a loan amount of $500,000 in NSW with an LVR of 80% of the property value. Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
Owner occupied
20% min deposit
Redraw facility
Owner occupied
20% min deposit
Redraw facility
Owner occupied
20% min deposit
Redraw facility
Owner occupied
5% min deposit
Redraw facility
Owner occupied
10% min deposit
Redraw facility
This article was reviewed by our Editor-in-Chief Nina Rinella before it was updated, as part of our fact-checking process.
Owner occupied
20% min deposit
Redraw facility
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