With a possibility that rates will rise again in the future, is it best to choose a loan with the lowest interest rate? How can you tell if one loan is as good as it looks, or even better than another?
Mortgage lender Resi Mortgage Corporation says borrowers hunting around for the best standard variable rate need to also check the comparison rate because it will give them a better indication of the loan's true cost.
Resi's Head of Consumer Advocacy, Lisa Montgomery, says that borrowers should be aware that some of the newer products on the market have high comparison rates associated with them and should be more closely scrutinised for that reason.
"By looking at the comparison rate schedule which factors in the financial effect of the compulsory fees and charges over the term of your loan, it could very well make the perceived savings on a low rate negligible - even within the first year", Ms Montgomery said.
She added that as a rule of thumb, a comparison rate of around .05 to .10 per cent above the annual percentage rate is a reasonable figure, however when a comparison rate starts to hover more than .25 to .50 per cent above that annual percentage rate, it requires more detailed investigation into the loan costs that are contributing to that higher rate.
"Lenders are legally required to provide borrowers with a comparison rate schedule with their loan documentation, as well as including the comparison rate on advertisements and other marketing material so that borrowers can more easily compare one loan against another.
"Now that we are in a rising rate market, a higher comparison rate can have a significantly greater effect on the hip pocket for borrowers, so it's important to familiarise yourself with its vital role sooner rather than later, if you weren't already using it during your loan search."
Montgomery said borrowers should note however, that although ongoing loan fees and charges are part of the comparison rate, there may be other costs that are not included because they are dependent on whether or not an event occurs, such as early repayment or redraw fees.
"It's also important to put the comparison rates into context if you are doing a cost versus benefit analysis on how the loan is structured and what each feature is actually costing you.
"For example, certain loan features such as flexible repayment arrangements and fee free banking may save you more than they cost - so you need to consider how valuable those loan features (and the service that goes with them) are to you when weighing up your decision", she concluded.