Interest rate vs comparison rate
The interest rate is what you pay on the loan. The comparison rate is what ASIC requires lenders to publish so you can see the true cost — fees included.
What's the difference?
The interest rate is the percentage applied to your loan balance to calculate interest charges. The comparison rate is the same loan expressed including most upfront and ongoing fees, calculated against a standardised $150,000 loan over 25 years on a P&I basis.
ASIC requires every advertised mortgage rate in Australia to display a comparison rate alongside it (National Consumer Credit Protection Act, Schedule 1). It exists because two loans with the same headline rate can have wildly different true costs once application fees, monthly account fees, and discharge fees are baked in.
When is the comparison rate misleading?
The standardised $150K / 25-year basis is now almost laughably low. Most Australian home loans are $400K-$1M+ over 30 years. Fixed-dollar fees (a $395 annual package fee, say) are amortised over a much longer balance and term in real life — so the comparison rate overstates the impact of those fees.
It also doesn't include cashback, discharge fees, break costs, or LMI. For investors or refinancers, the comparison rate is a starting point — you still need to model your specific scenario.
Use comparison rate to filter out obviously fee-laden loans. Use a real repayment calculation against your actual loan size to make the final call.
Why we sort by comparison rate by default
Every leaderboard on Ratesniffers sorts by comparison rate ascending. It's the closest single-number proxy for total cost that ASIC mandates lenders publish, so it's the only sort order that's apples-to-apples across every lender we track.
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