EyeOnWhy comparison rates exist
A mortgage offer bundles an interest rate with fees, introductory periods and a rate it reverts to afterwards. Judged on the headline rate alone, a deal with a low rate and a large fee can look better than a fair-rate, no-fee deal that actually costs less.
Comparison rates — called APRC in some markets, comparison rate in others — address this by expressing the cost of the loan over its full term as a single annualised percentage that includes the interest and the compulsory fees. Two offers with the same comparison rate cost roughly the same; a lower one is genuinely cheaper on the stated assumptions.
What the figure includes
A typical comparison rate includes the introductory rate, the follow-on rate for the rest of the term, and compulsory fees such as arrangement charges. It assumes the loan runs to full term with no overpayments, rate changes beyond the stated schedule, and no early exit.
Those assumptions are exactly why it is useful and why it is incomplete. Real borrowers move house, remortgage when deals end, and overpay. The comparison rate answers a specific question — full-term cost under fixed assumptions — and should be read as that answer, not as a personal quote.
How to use it alongside the headline numbers
A practical method: shortlist offers by comparison rate, then check the monthly payment, the fee total, and what happens at the end of any introductory period. Where two offers have similar comparison rates, the tiebreakers are flexibility — overpayment allowances, portability, exit charges — rather than fractions of a percent.
If you expect to move or remortgage early, the full-term assumption flatters long deals with back-loaded fees. Compare the cost over your realistic holding period instead; the mortgage repayment calculator and remortgage savings calculator can frame both views.
Different labels, same idea
Not every market uses APRC. The United States uses APR for mortgages; Australia mandates a comparison rate; the EU mandates APRC for mortgage credit. The mechanics are similar enough that the checklist above travels, but the inclusion rules differ — what counts as a compulsory fee varies by jurisdiction.
Whatever the label, the habit is the same: find the single standardised cost figure the market requires, read its assumptions, and use it to shortlist rather than to decide. The final decision deserves the specific numbers of your own situation.