What a comparison rate actually tells you (and what it doesn’t)

A comparison rate combines a loan’s interest rate with most known, ascertainable fees and charges into a single percentage, calculated under a legislated formula on a standardised example — $150,000 over 25 years for home-loan-scale products — so advertised loans can be screened like-for-like. It does not show what your own loan will cost: by law it excludes government fees, charges and duties and event-dependent costs such as early repayment or redraw fees, and its own mandated warning states it is accurate only for the example given.

Key points:
- A comparison rate rolls the interest rate and most known fees and charges into one percentage — [Moneysmart](https://moneysmart.gov.au/glossary/comparison-rate) describes it as a rate that helps you work out the true cost of a loan.
- It is required by law, not marketing: under Part 10 of the [National Credit Code](https://www.legislation.gov.au/C2009A00134/2025-06-10/2025-06-10/text/original/pdf/2), a credit advertisement that states an interest rate must in general also contain the comparison rate, identified as such and no less prominent than the advertised rate or any repayment amount.
- Home-loan comparison rates are calculated on a legislated standard example — **$150,000 over 25 years** under regulation 97 of the NCCP Regulations 2010 — which is why lenders quote the same odd-looking loan size.
- By law the calculation excludes government fees, charges and duties, and need not include fees that depend on events that may or may not happen — early repayment, redraw and late payment fees sit outside the number, as do fee waivers and features such as offset accounts.
- Every advertised comparison rate must carry a prescribed warning that it applies only to the example given and that different amounts and terms will result in different comparison rates.
- Used sensibly it is a shortlisting tool: screen products with the comparison rate, then ask for a Key Facts Sheet, which for standard home loans must include a personalised comparison rate built on your actual loan amount and term.