• Home loan terms and mortgage definitions

  • Comparison rate

    A nominal rate per annum calculated based on certain fees and charges together with the compounding frequency as outlined in the Consumer Credit Code.

    A nominal interest rate incorporating certain fees and charges to help consumers identify and compare the true cost of a home loan When shopping for a home loan, people often focus on the advertised interest rate. While this is a useful guide to what you’ll pay, it’s doesn’t reflect the true cost of the loan because it excludes associated fees and charges, which can vary widely between lenders. A comparison rate is a tool that helps consumers identify the true cost of a loan because it includes both the interest rate and fees and charges relating to a loan, reduced to a single percentage figure. It excludes government fees and charges that are standard across all loans. According to the National Credit Code, comparison rates must be provided for any form of fixed term credit. This includes home loans that must be repaid within a specified time period (eg. 25 years). A comparison rate allows you to compare ‘apples with apples’ and make a more informed decision when choosing a home loan. This table summarises what is considered when calculating a comparison rate.

    Inclusions  Exclusions 
    The amount and term of the loan Government and statutory fees (eg. stamp duty)
    The repayment frequency Event-based fees and charges that may or may not apply (eg. redraw fees)
    The nominal interest rate Fee waivers or discounts that may apply
    Upfront and ongoing fees and charges Fees and charges that are not ascertainable when calculating the comparison rate

    Advertised comparison rates

    Because different loan amounts and terms produce different comparison rates, comparison rates in advertisements must be based on a standardised amount and term that is typical of the loan being advertised. For home loans, that’s a loan of $150,000 for 25 years.

    Comparison rate schedules

    Credit providers including lenders, finance brokers and linked suppliers, must also provide consumers with comparison rate schedules, which detail the various comparison rates for a range of standard loan amounts and terms. Comparison rate schedules can be used to compare the comparison rates across the lender’s home loan range as well as against loans of other lenders. 

    Fees, conditions, limitations and lending criteria apply. This information is of a general nature only and is not to be relied upon as being appropriate or suitable for your particular circumstances.