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Consumers have been able to determine the true cost of their mortgage loans since the Compulsory Comparison Rate Legislation (CCRL) came into force nationally July 1, 2004.

Under the legislation any advertisement by credit providers and finance brokers containing an annual percentage rate must also show a comparison rate. The comparison rate must take into account all non-government credit fees and charges included in the loan.

The legislation is designed to give borrowers a better perspective when comparing different home loan products. Comparison rate legislation has evolved because of the rapid growth in the mortgage industry and increased competition between the lenders. The comparison rate gives borrowers a clearer picture of the actual costs when taking out a home loan.

Be aware that fees and charges are only included in the calculation if they are known when the comparison rate is disclosed. For this reason, early repayment charges and redraw costs are not considered in the calculation.

The CCRL, which forms part of the Uniform Consumer Credit Code (UCCC), will be in force for three years, after which the legislation will be reviewed to determine how the comparison rate is being used by consumers and credit providers.

What does it mean for consumers?

1. Any advertisement containing an annual percentage rate must contain the comparison rate. The comparison rate will be for six specific amounts.

2. Credit providers and finance brokers must display and make available copies of the comparison rate schedule at their offices.

3. Prospective buyers must be given a comparison rate schedule with any application form for credit.

4. The comparison rate given to prospective borrowers must include all known non-government credit fees and charges.

5. The prescribed warning that comparison rate only applies to the example/s given and that, different amounts and terms will result in different rates. And that costs such as redraw fees etc are not included in the loan, but may affect the cost of the loan must accompany the comparison rate and rate schedule.

* Jennifer Schelbert Dip. Fin. Serv. /FinMBM is a director of Mrs. Mortgage Pty Ltd, a licensee for Choice Aggregation Services, a member of COSL and a full member of the Mortgage Finance Association of Australia.

Phone: 61 3 9315 9750

http://mrsmortgage.com.au

Disclaimer: This document is for information purposes only, and must not be relied upon as a substitute for professional services or legal advice.

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