A comparison rate is a single percentage that combines a home loan’s interest rate with most of its fees and charges, so loans with different fees can be compared on one basis. In Australia it must be shown beside any advertised rate, and for home loans it is calculated on a $150,000 loan over 25 years.

A loan at 6 per cent with $600 of upfront fees and a $10 monthly fee has a comparison rate of about 6.15 per cent, which overstates the effect of fees on a typical Sydney loan.

How is the comparison rate calculated?

It is the interest rate that would produce the same total cost as the loan’s actual rate plus its fees, on a standard loan: for secured home loans, $150,000 over 25 years, set by the national credit rules so every lender calculates it the same way. Because it runs over the full 25 years, a fixed-rate loan’s comparison rate includes the variable rate it reverts to.

What fees are included, and what is left out?

What the comparison rate covers
Included Left out
The interest rate, including any revert rate after a fixed period Government charges such as stamp duty and registration fees
Upfront fees such as application and settlement fees Fees for optional features or events, such as redraw or early repayment fees
Ongoing fees such as monthly or annual package fees Break costs on fixed loans
Discharge fees Late payment fees, and savings such as offset accounts or fee waivers

A worked example

The figures below are illustrative, calculated for a hypothetical loan at a 6 per cent example rate; they are not real products.

How fees move the comparison rate on a $150,000, 25-year loan at 6%
Fees Comparison rate
No fees 6.00%
$395 upfront About 6.03%
$8 a month About 6.09%
$600 upfront and $10 a month About 6.15%

The same $600 upfront and $10 monthly fees on a $600,000 loan over 30 years make an effective rate of about 6.04 per cent, not 6.15 per cent. Fees are fixed dollar amounts, so they matter less as the loan grows. That is the comparison rate’s main limitation for Sydney borrowers.

How should you use the comparison rate?

  • Use it as a first filter between loans of the same type: variable against variable, or fixed for the same term.
  • Then cost the loan at your size. On a large loan, a lower interest rate usually beats lower fees. The refinance calculator compares two loans in dollars.
  • Value the features you will use. An offset account can save more than its package fee if you keep a balance in it; the comparison rate ignores that entirely. The offset accounts guide explains when it pays.
  • Check the excluded fees. Redraw fees, break costs and discharge costs sit outside the figure.
  • For fixed loans, read the revert rate. A low fixed rate with a high revert rate shows up in the comparison rate but is easy to miss in the headline. See fixed vs variable.

Comparison rate vs interest rate: which matters more?

The interest rate, on most Sydney loans: it sets your repayments, while the comparison rate is a disclosure tool for total cost. On a loan of $500,000 or more, compare interest rates first, then the fees in dollars; on a small loan, fees weigh more and the comparison rate is closer to your real cost. The home loan glossary defines the other terms on a loan offer.

Which figures matter in a loan offer?

  • The interest rate, and whether it is variable, fixed or split.
  • The revert rate for any fixed portion, which applies when the fixed term ends.
  • Upfront fees: application, valuation, settlement and any package fee in the first year.
  • Ongoing fees: monthly account keeping or an annual package fee.
  • Exit costs: discharge fees and, for fixed loans, how break costs are calculated.
  • Features you will use: an offset account, extra repayments and redraw, and any fees attached to them.

Put the interest and the fees for your actual loan size and expected time in the loan into dollars. That figure, not the comparison rate on a $150,000 loan, tells you which offer is cheaper for you.

Why does loan size change the comparison rate?

The comparison rate assumes a $150,000 loan, so the same fees look larger than they really are on a Sydney-sized loan. Take a loan at 6 per cent with $600 of upfront fees and a $10 monthly fee, over 25 years:

The true cost of the same loan at different sizes
Loan amount Rate including the fees
$150,000, the benchmark About 6.15 per cent
$300,000 About 6.08 per cent
$600,000 About 6.04 per cent
$900,000 About 6.03 per cent

On a large loan the interest rate does most of the work. Fees still matter, but in dollars, not in the comparison rate.

How do package loans and annual fees affect it?

Many loans with an offset account come in a package with an annual fee. A $395 annual fee on a loan at 6 per cent lifts the true cost to about 6.35 per cent on the $150,000 benchmark, but only to about 6.09 per cent on $600,000. Whether the package pays its way depends on what you use it for: an offset balance large enough to save more than the fee, or discounts that outweigh it. The offset savings calculator shows the point where it breaks even.

What should you ask when comparing two offers?

  • What is the interest rate, and is it fixed or variable?
  • What are the upfront fees and the ongoing fees, in dollars, for my loan size?
  • Is there an offset account, and does it carry a fee?
  • For a fixed rate, what is the revert rate when the fixed period ends?
  • Are there limits on extra repayments, or fees for repaying early?
  • Is the rate a discount off the standard variable rate that could change for existing customers?

Put the answers side by side in dollars over the time you expect to keep the loan. That number, not the headline rate or the comparison rate alone, is the one to decide on.

How do fixed rates and revert rates affect it?

For a fixed-rate loan, the comparison rate covers the whole 25 years, so most of it reflects the variable rate the loan reverts to. A loan fixed at 5.75 per cent for three years that then reverts to 6.50 per cent, with $600 of upfront fees and a $10 monthly fee, has a comparison rate of about 6.44 per cent on the $150,000 benchmark. That is why fixed loans often show a comparison rate well above their fixed rate.

The useful reading is the revert rate itself. Ask what it is, whether it is the lender’s standard variable rate, and what the lender will offer when the fixed period ends. The guide to when your fixed rate ends covers that conversation.

Questions people ask

Why is the comparison rate higher than the interest rate?

Because it adds the loan’s upfront and ongoing fees to the interest. A loan with no fees has a comparison rate equal to its interest rate.

Is a lower comparison rate always the better loan?

No. It is calculated on a $150,000 loan, so on a large loan the fees matter less than it suggests. Features such as offset accounts, which the figure ignores, can also change which loan is cheaper.

Does the comparison rate include stamp duty?

No. Government charges such as stamp duty and registration fees are excluded, as are fees for optional events such as redraw or early repayment.

Why does a fixed rate have a higher comparison rate?

The comparison rate covers 25 years, so it includes the variable rate the loan reverts to after the fixed period, which is often higher than the fixed rate.

Charles Touma compares loans on what they cost at your loan size, not just the headline figures. If you are weighing two offers, a short call will put them in dollars. General information only, not credit advice; comparison rates are calculated by lenders under the national credit rules, and the examples above are illustrative. Sources: the comparison rate rules in the National Credit Code and ASIC’s Moneysmart guide to comparison rates, checked 14 October 2026.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.