Comparison Rates

Discussion in 'Property Finance' started by Bandita, 2nd Oct, 2008.

  1. Bandita

    Bandita Member

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    I've gotten myself confused about what "comparison rate" is

    Is it:

    a. The "effectual" rate of the loan (i.e when you add in yearly fees, higher rates in future years {eg. if home starter type loans}, etc - what the interest rate really is)
    b. The average of other lenders/similar products rates to compare against
    c. Something else?

    I always thought it was "a" - but certain comments lately have made me think it's "b"?

    Thanks
    Jen
     
  2. LynnH

    LynnH Member

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    You're right, Jen - (a) it is!

    Cheers
    LynnH
     
  3. tess85

    tess85 Addicted to SS

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  4. Rolf Latham

    Rolf Latham Member

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    Hiya

    The comparsion rate is meant to be the "total" or real cost of a loan, brought back to a simple interest rate so you can compare apples with apples.

    Unfortunately, while the sentiment of the legislation introduced was nice, the reality is that you cant compare oranges and carrots and oranges to get an evenly scored result

    Alas, its useless for consumers and has helped brokers increase their business, due the confusion.

    ta
    rolf