Your mortgage interest rate might be higher than you think

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Some of Australia’s cheapest home loan rates are more expensive than they initially seem, a new analysis of variable home loans has found.

RateCity has identified a range of variable mortgage loans that have very low advertised rates but significantly higher comparison rates (see table below).

The comparison rate is often regarded as the ‘real’ cost of a home loan, because it not only includes the advertised interest rate but also most fees – which can add up to thousands of dollars over the life of a mortgage.

Online Home Loans currently has one of the cheapest mortgage loans in Australia, with its Horizon Home Loan priced at 3.54 per cent. However, the comparison rate is 3.86 per cent – a gap of 0.32 percentage points.

Online Home Loans charges an establishment fee of $275 and an annual fee of $299, which means borrowers would have to pay $9,245 in fees over the life of a 30-year home loan.

ME Bank has a gap of 0.42 percentage points for its Member Package Flexible Home Loan – an advertised interest rate of 3.69 per cent and a comparison rate of 4.11 per cent.

This mortgage loan doesn’t have an establishment fee, but it does include a $395 annual fee, which would add up to $11,850 after 30 years.

Lender Product Advertised rate Comparison rate Gap
Online Home Loans Horizon Home Loan 3.54% 3.86% 0.32%
Bank of Sydney Expect More Home Loan Package 3.58% 3.99% 0.41%
Auswide Bank Freedom Package Home Loan Plus Discount Variable 3.59% 3.99% 0.40%
People’s Choice Credit Union Package Variable Home Loan 3.59% 3.99% 0.40%
ING Orange Advantage 3.68% 4.00% 0.32%
ME Bank Member Package Flexible Home Loan 3.69% 4.11% 0.42%
Greater Bank Ultimate Variable Home Loan 3.74% 4.12% 0.38%
Gateway Bank Premium Package Home Loan 3.74% 4.06% 0.32%
Suncorp Bank Home Package Plus Personal Variable Special 3.79% 4.18% 0.39%
Australian Unity Health, Wealth & Happiness Package Home Loan 3.84% 4.23% 0.39%
Bank First Premier Package Home Loan 3.89% 4.26% 0.37%
Northern Inland Credit Union Dream Value Package Home Loan 3.94% 4.29% 0.35%

Please note that the comparison rate is based on a $150,000 loan over 25 years, so the figure might be slightly inaccurate for mortgages that are of a different size or have a different loan term.

Also, the cheapest home loan isn’t always the best home loan for a particular borrower.


^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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