Beware comparing comparison rates

Partner at Gadens Lawyers, Jon Denovan, says borrowers need to take care with comparison rates. “There are still some optional fees that are not included,” he says.

“They include redraw fees and administrative charges for handling one-off repayments. The other thing to remember is that the comparison rate will not include current discount offers or fee waivers."

An analyst with InfoChoice, David Lalich, agrees that while comparison rates are a useful tool, borrowers need to take care. “There is a danger [that] comparison rates will lead some consumers to oversimplify their loan choice and not look beyond the price of a loan to the suitability of features,” he says.

“A comparison rate only looks at pricing. It does not take into account the value of features such as repayment flexibility, redraws and offset accounts, which … can reduce costs significantly.”

Source: The Age