What Is a Comparison Rate?
A comparison rate is a standardised figure that blends a loan’s interest rate with most of its mandatory fees and charges into a single annual percentage. Australian law requires every lender to display a comparison rate alongside any advertised home loan rate – making it one of the most important disclosures in the mortgage market.
The comparison rate is calculated using a standard reference loan set by ASIC: $150,000 borrowed over 25 years with monthly principal-and-interest repayments.
Every lender in Australia uses the same inputs, which is the only way products from different institutions can be compared on a single number.
Why the Gap Between Rate and Comparison Rate Matters
A loan advertised at 5.89% with a comparison rate of 6.22% carries roughly 0.33 percentage points of fees baked in. A loan at 5.79% with a 6.45% comparison rate looks cheaper on the headline but costs more in practice once fees are accounted for.
The wider the gap between the two numbers, the more fee-heavy the product. A narrow gap suggests a low-fee or no-fee loan structure. This is the first check to run on any rate that looks unusually sharp.
How the Calculator Works
Enter:
- The loan’s advertised interest rate
- The loan amount
- The loan term
- The lender’s fees (establishment fee, ongoing monthly or annual fees)
The calculator outputs the comparison rate for your loan scenario – which may differ from the advertised comparison rate, since that figure is always based on the standard $150,000/25-year reference loan, not your actual borrowing situation.
The Limitation Every Borrower Should Understand
The ASIC reference loan of $150,000 was set at a time when the average Australian mortgage was around that figure. By the end of 2025, the average new owner-occupier loan nationally had grown to approximately $736,000 – and in many Perth suburbs, new loans regularly exceed $600,000–$700,000.
Because the published comparison rate spreads fixed fees (like a $600 establishment fee or a $395 annual package fee) across a small $150,000 baseline, those fees look proportionally larger than they would on a real $650,000 loan. The advertised comparison rate routinely overstates the fee burden for modern Australian borrowers. Using this calculator with your actual loan amount gives you a more accurate picture.
What’s Included in the Comparison Rate – and What Isn’t
| Included | Not Included |
| Interest rate | Government charges (stamp duty, registration fees) |
| Establishment / application fees | Early repayment / break costs on fixed loans |
| Ongoing monthly or annual fees | Redraw fees |
| Loan service fees | Offset account fees (sometimes) |
| Conditional fees (e.g. late payment fees) |
This matters because two loans with identical comparison rates may have very different fee structures once you dig into the Product Disclosure Statement.
A loan with a high annual package fee but a low establishment fee behaves differently from a loan with a high upfront cost but no ongoing charges – particularly if you plan to refinance within a few years.
Fixed vs Variable: How Comparison Rates Behave Differently
For variable-rate loans, the comparison rate is relatively stable. For fixed-rate loans, the comparison rate must make an assumption about what happens when the fixed period ends and the loan reverts to a variable rate – typically the lender’s current standard variable rate. This assumption can significantly inflate the comparison rate on fixed products, even if the fixed-period rate is genuinely competitive.
Perth borrowers considering a fixed-rate loan should use this calculator alongside the Loan Comparison Calculator to model total cost across the full loan term, including the revert rate.
Practical Uses for the Comparison Rate Calculator
- Checking whether a low-rate loan is genuinely cheaper after fees
- Comparing two lenders where one charges higher fees but a lower rate
- Modelling how an annual package fee affects the true cost of your loan at your actual borrowing amount
- Verifying whether refinancing to a new lender delivers a meaningful cost improvement once break costs and establishment fees are included
For a full picture before refinancing, pair this with the Mortgage Switching Calculator to confirm the savings clear the switching costs.
Frequently Asked Questions
1. Is the comparison rate the same as the interest rate?
No. The comparison rate is always equal to or higher than the interest rate. It incorporates most mandatory fees, giving a more complete picture of annual borrowing cost. A loan with a low interest rate and high fees may have a higher comparison rate than a loan with a slightly higher rate and minimal fees.
2. Why does my actual comparison rate differ from the advertised one?
Because the advertised comparison rate is always calculated on $150,000 over 25 years. Your actual loan amount and term will produce a different figure – usually lower on larger, longer loans because fixed fees represent a smaller share of the total.
3. Does the comparison rate include offset account fees?
Not always. Some lenders charge a higher base rate or annual fee for loans with offset accounts, and that cost may or may not flow through to the published comparison rate depending on the product structure. Always check the Product Disclosure Statement.
4. Can I use the comparison rate to compare a fixed and variable loan?
With caution. Fixed-rate comparison rates include assumptions about the revert rate, which may or may not reflect what you’ll actually pay. They’re useful as a rough guide, but the Introductory Rate Loan Calculator can provide a more nuanced view of fixed-period loan costs.
5. Does a lower comparison rate always mean a better loan?
Not necessarily. The comparison rate focuses on interest and most fees but doesn’t capture the value of loan features like redraw, offset, or repayment flexibility. A loan with a slightly higher comparison rate but a fully functional offset account may deliver better net outcomes for a borrower who maintains a meaningful offset balance.
Get the Full Picture With a Broker
Comparison rates are a useful filter – they’re not a complete verdict. Central Lending Solutions helps Perth borrowers look beyond the headline and find loan products that balance rate, fees, and features for their specific situation. With access to a wide lender panel, our team can run the real numbers on your actual loan before you sign anything.
Call (08) 9201 8570 to get started.