Mortgage Makeover

Reporter: Andrew Bourke

It was once the great Australian dream to own you're own home, but with interest rates on the rise, for some Australian families, the dream has become a nightmare. But here's the secret the banks don't know want to share, interest rates on your mortgage are not set in stone.

Like most, mother of three Lyndall Spooner and her husband Tom feel the pinch every time rates rise. They pay $2200 a month on their mortgage, last week's rise adding another $50. "We've definitely noticed it, especially with three kids, cutting down on things."

So Lyndall decided to research and shop around... "I rang around a few of the banks and mortgage companies to see what the best rate I could get and said I was thinking of refinancing my loan. A few of them gave me a standard rate and when I asked them if that was the best they could do- they said they could drop it by 0.7%"

Gill McPhee had enough of dealing with her current lender, so after surfing the net, scouring the business pages and picking up a few finance magazines, she too found a lender that slashed her rate from 7.57% down to 6.9% and the best part- there's no penalty for changing. "With the new lender there are some upfront fees and calculating over the long term it'll take two years to pay that off, but in the long term I'll be saving close to $50,000" says Gill. "I think a lot of people lack confidence to do this sort of thing but because this is one of the biggest outlays, they really should take the reigns, take control and go looking for the lowest interest rate possible." Finance guru Peter Switzer advises his clients to haggle for the best possible deal and don't be shy. "The most important thing is to go to your bank and look this is the interest rate I'm on now and I'd like a lower rate, is there anything you can do for me?" "It never hurts to ask and generally speaking they'll be able to offer you something superior." Mortgage broker David Johnston argues that if your current lender won't play ball, then play them off against their competitors.

"Talk to different lenders let them know what you are currently getting, let them know what you can get from other lenders and see what they'll give you" adds David. While you may think this sounds like too much hard work- shopping around for the best rate, many experts agree it will pay off in the long run. The Reserve Bank will meet next month and has made no promises rates won't rise again. Smart home owners are now getting in early, finding the best rate and locking it in.