Q .Can you help me understand the point of comparing home loan interest rates…
A. You are quite right when you say that the variable rate on your loan can change at any time. That said, the media attention on lenders (particularly banks) means that there is pressure on them to pass on the full savings of a rate cut and to limit any rate rise to the impact a Reserve Bank increase has on their cost of funds. Customer retention is also important to lenders – they are keen to hold on to the business of good loyal customers and randomly increasing interest rates is likely to result in little business from new customers and existing ones deserting to the competition.

There has been some debate about the benefit of comparison rate schedules in that these rates only include quantifiable fees as at the comparison date and take no account of any added features of a product. Lenders can and often do introduce new fees during the loan term and while a basic variable loan may suit many borrowers, the added features of some products provided at a marginally higher interest rate may deliver significant benefits and savings to a borrower in the long term. The comparison rate schedule is a snapshot of rates on a date – whether it is a truly meaningful tool for borrowers remains open to question.  

Related: Home Loan Calculator