Tricia WilliamsThe record low interest rates we currently have in Australia has put borrowers squarely in the box seat when it comes to choosing a home loan.

There are some highly competitive loans available as lenders eagerly battle for new business. However, it is important buyers are aware of the hidden dangers that may come with some of the cheaper home loan rates – especially when it comes to fixed rate loans.

If you’re looking at the one of the lower fixed rate loans on offer, it might pay to be mindful of the following traps:

  • Higher Application Fees – Also known as up-front, start-up or set-up fees, application fees can vary dramatically among lenders. Borrowers should be aware that some of the lower fixed rate loans on the market come with very high application fees.
  • Higher Switch Rates – The fees to switch at the end of the fixed rate loan may also be much higher on loans with a lower interest rate.
  • Limited Extra Repayments – Sometimes, there may be a limit on how many extra repayments you can make over the life of a fixed rate loan. Before committing, check if your loan allows you to make extra payments, how many you can make, and if there are any fees for doing so.
  • No Redraw Facility – Redraw facilities are not always offered on a fixed rate loan, meaning you cannot access any extra money you have in your home loan.
  • Fees For Breaking Fixed Rate Mortgages – Borrowers may be charged a fee should they break a fixed rate mortgage. Banks have their own formula to calculate and pass on the economic cost – this can end up to be quite a high amount.

Fixed rate mortgages are a great option for people who want certainty around the amount they must repay each month. While there seems little difference between fixed and variable rate loans, variable rates will offer a borrower much more flexibility.

To ensure a loan that’s right for you, take the time to read the fine print for fixed rate loans – especially around fees and charges. And always check the rate the loan will switch to at the end of the term. If a fixed term interest rate seems too good to be true, it might be.

If you’d like more information on fixed or variable home loan options, contact me at Edney Ryan Mortgage and Finance on 02 9908 9888 or email

Patricia Williams is a credited representative (CRN 400458) of BLSSA Pty Ltd (Australian Credit License No. 391237).