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Mortgage Basics

The comparison-rate blind spot

The comparison rate is the best single number for comparing loans, but it rests on a fixed assumption that may not match your loan. Here's where it helps and where it quietly misleads.

6 min read·Reviewed 26 June 2026·Ratesniffers Editorial Team

What does a comparison rate not tell you?

The comparison rate folds most fees into a single figure, which makes it the best starting point for comparing two loans. But it's calculated on a standard assumption set, in Australia a $150,000 loan over 25 years, and most real loans are larger and longer. Because fixed dollar fees are spread across that assumed loan, the comparison rate can understate or overstate their impact on your actual balance. It also can't capture features you value, like an offset, or fees you'll never trigger.

Where the comparison rate can mislead

Two blind spots matter most. First, the standard loan size means a flat annual fee looks smaller on a big loan and larger on a small one than the comparison rate suggests. Second, the comparison rate can't price the value of features. An offset account, a redraw facility, or unlimited extra repayments don't show up, yet for the right borrower they're worth more than a small rate difference.

What the comparison rate doesWhat it misses
Folds in most standard feesYour actual loan size and term
Lets you rank two loans quicklyThe value of an offset or redraw
Captures the true headline costFees you may never trigger
Uses one standard assumptionHow you'll actually use the loan
Use the comparison rate as a first filter, not the final word. Then check the loan against your real loan size, term, and the features you'll actually use.

How should you use the comparison rate?

Treat it as the second number you read, right after the headline rate. A wide gap between the two flags a fee-heavy loan worth a closer look. Then move past it: model the fees against your actual balance, and put a value on the features you'll use. The comparison rate narrows the field quickly, but the cheapest loan for you is decided by how it fits your specific situation.

  • The comparison rate uses a standard loan size and term, not yours.
  • It can't price an offset, redraw, or extra repayments.
  • A wide gap from the headline rate signals heavy fees.
  • Use it to shortlist, then check the loan against your real numbers.
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The comparison-rate blind spot: frequently asked questions

What does a comparison rate not tell you?
The comparison rate folds most fees into a single figure, which makes it the best starting point for comparing two loans. But it's calculated on a standard assumption set, in Australia a $150,000 loan over 25 years, and most real loans are larger and longer. Because fixed dollar fees are spread across that assumed loan, the comparison rate can understate or overstate their impact on your actual balance. It also can't capture features you value, like an offset, or fees you'll never trigger.
Where the comparison rate can mislead
Two blind spots matter most. First, the standard loan size means a flat annual fee looks smaller on a big loan and larger on a small one than the comparison rate suggests. Second, the comparison rate can't price the value of features. An offset account, a redraw facility, or unlimited extra repayments don't show up, yet for the right borrower they're worth more than a small rate difference.
How should you use the comparison rate?
Treat it as the second number you read, right after the headline rate. A wide gap between the two flags a fee-heavy loan worth a closer look. Then move past it: model the fees against your actual balance, and put a value on the features you'll use. The comparison rate narrows the field quickly, but the cheapest loan for you is decided by how it fits your specific situation. Key points: The comparison rate uses a standard loan size and term, not yours.; It can't price an offset, redraw, or extra repayments.; A wide gap from the headline rate signals heavy fees.; Use it to shortlist, then…

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