11/10/2022
COMPARISON RATES
What are they?
How do they work?
You’re looking for the best mortgage deal and you see an advertisement. It shouts 4.2% INTEREST! and, underneath that seemingly too good to be true rate is 7.8% comparison rate. What does this mean?
Lenders are required to publish the ACTUAL/ TRUE/ REAL Rate. They could have used any of those synonyms given the aim is to protect consumers and to prevent them being misled when it comes to home loan interest rates.
However, they chose COMPARISON RATE, a wonderfully confusing term which most ordinary people think refers to other lenders’ products or the rest of the market.
Because a ‘comparison’ rate includes all the fees and charges that can be applied to a home loan, it helps to show customers what the true cost of a loan is. In some instances, lenders offering the lowest rate may not actually be offering the cheapest loan, which is what a ‘comparison’ rate demonstrates.
It was intended to make it much simpler to hold two loan products side by side and see at a glance which one is the better deal financially.
The True rate or ‘comparison’ rate incorporates fees and charges, the rate at which the principal amount is paid down, and the total interest paid over the loan term. All of these components vary depending on the loan amount and term of the loan. So to find out your Actual/True rate, call or email us.
The lenders have to cite the loan amount and term they have based the ‘comparison’ rate on.
It is vastly lower than the average mortgage of most Australians.
Contact us so we can help calculate your True Rate.
0414 973 236
[email protected]
