Every Australian home loan advertisement must display a comparison rate alongside the headline interest rate — a requirement under the National Consumer Credit Protection Act 2009 (NCCP). But comparison rates are calculated on a standardised $150,000 loan over 25 years, which bears little relationship to most real-world mortgages today. Before you sign, understand what the comparison rate actually tells you, what it excludes, and what other costs in the contract will really affect your repayments.
What is a Comparison Rate Disclosure?
A home loan contract is a credit contract regulated by the NCCP Act 2009 and the National Credit Code. The comparison rate is a single percentage figure that accounts for the interest rate, most fees, and charges, expressed as an annual rate. It is calculated under the NCCP Regulations and is designed to help consumers compare loans on a like-for-like basis.
Red flags to watch for
Section 6 of the NCCP Regulations requires comparison rates to accompany any advertised home loan interest rate. Missing comparison rates indicate non-compliance.
Break costs can run into tens of thousands of dollars and are excluded from the comparison rate. Lenders must disclose the calculation methodology under NCCP.
Flexible redraw is a key selling point — if it's fee-loaded or conditionally restricted, the comparison rate may overstate the loan's real value.
Unilateral variation clauses can materially change the product. ASIC guidance restricts when such changes can be enforced.
Comparison rates assume specific loan sizes and terms. Your real rate may include LMI, risk fees, or lower discounts.
Under the National Credit Code, all fees and default interest rates must be disclosed in the contract schedule. Burying them violates NCC Part 2.
Your legal rights
The National Consumer Credit Protection Act 2009 and National Credit Code (Schedule 1 to the Act) govern home loans. Key protections include responsible lending obligations (NCCP s 128), mandatory comparison rate disclosure (NCCP Regulations Reg 100), fee and default disclosure requirements (NCC s 17), and the hardship variation framework (NCC s 72). ASIC is the regulator. Disputes can be escalated to the Australian Financial Complaints Authority (AFCA).
Questions to ask before you sign
- 1What is the comparison rate, and what does it exclude for a loan of my actual size?
- 2How are break costs calculated if I fix and later refinance?
- 3What are the ongoing, redraw, and discharge fees in dollar terms?
- 4What LMI will I pay, and is it added to the loan principal?
- 5What is the process and cost if I need a hardship variation under NCC s 72?
- 6Is the lender an AFCA member? What is their membership number?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.