Mortgage Home Loans

Reporter: Damien Hansen

One in three mortgage holders are switching lenders searching for that better deal. Mother of two Cheryl Cope is paying 5.9% per annum on her three hundred thousand dollar mortgage, after locking in for three years in February last year. "We are very relieved because we can plan for the next three years on where our money is going to go", Cheryl said.

Home loan swapping hit an all time high in March just as Australians contemplated the effects of their fifth rate rise in seven months. Cheryl's repayments are around $1600 a month and it would be a lot more if she hadn't rolled the interest rate dice.

John Locke's at the other end of the scale. "Times are very hard. I had to work every weekend and I had no time basically for myself", John said.

If both were servicing the average mortgage of $354,000 dollars over 25 years, John would be paying $2,850.50 a month -- Cheryl $1200 a month less at $1595.51. And as financial analysts warn, interest rates could reach double figures within two year so getting the right loan has never been more important or difficult. "Two years ago they were able to go out on a weekend and purchase a property without even having a deposit. These days they need to come up with at least a minimum of 8% of the property value for a deposit", said Mitchell Watson from Canstar Cannex.

Michaell says the honeymoon is over for first home buyers. "What we are seeing in the banks being a bit more responsible", he said.

Post global financial crisis, deposits are the new must have. "If you are going to place the minimum deposit down, you are looking around eight per cent. If you are looking to forgo having to pay lender mortgage insurance then its 20% of the property value", Mitchell said.

"The best loan is the loan that you pay off the quickest", said AMP financial planner Phil Pilgrim.

Phil warns changing home loans when interest rates rise can cost you. "You need to understand those costs, things like valuation costs, registration costs, discharge costs", Phil said.

His advice is to set a payment plan and stick to it. "It's 90% strategy and discipline and 10% possibly would come down to rate and product", he said.

With so many loan products on the market, if you are switching, which one is best for you? Well Canstar Cannex has crunched the numbers, awarding five stars to more than 120 loans.

Here are the top five, five star variable home loans:

ANZ's Breakfree package comes in at 6.46%

Newcastle Permanent's Premium Plus rate is advertised at 6.39%.

ECU Australia's Loyalty Plus rate is 6.15% per annum

State Custodians Standard Variable comes in at 5.89%

And Reduce Home Loans Basic Variable package has the lowest offering at 5.84%

They are the low rates but the reality of lending is the stakes can be higher -- much higher. "Unfortunately we've seen some cases where people have perhaps refinanced or something like that and they've got stuck in loans because of some really dodgy tricks, where they might be paying 60 or even unfortunately 90% interest rate", said Nicole Rich from the Consumer Action Law Centre.

Nicole says there is nothing stopping lenders in some states charging whatever interest they want. "We're hoping that people will start to get the message that sometimes debt isn't the answer", Nicole added.

She believes stricter lending guidelines will force us all to change. "Hopefully people are going to return to things like savings, buying things on lay-by and waiting a couple of weeks instead of having it now on credit", Nicole said.

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