Home Haggling

Reporter: Bryan Seymour

It's time to get you back in the black and the banks back in the real world.

Damien Smith is the CEO of Rate City -- a website where you can compare the loans on offer, from all lenders. "We always say to people that if you can see a rate that's sort of 6.5% or lower, that's a very good deal", Damien said.

The comparison rate on Westpac's Flexi First Option Low Rate Home Loan is 6.86% -- substantially more than the rates you'll pay elsewhere. "They're from people like Carrington, Homestar, State Custodians, so a bunch of names that people might not have heard of, but these people are hungry for your business and are substantially cheaper than the big four will have on any given day", Damien said.

"You certainly feel loyal to your bank when you've been with them for a very long time. You know how they work and you get to know the tellers at the branch, so to leave them is a really difficult choice. But you have to do what's best for you", said Andrea Peace

Last year, Andrea moved to Melbourne from Brisbane. She recently brought her two bedroom unit in Brunswick West with a $360,000 home loan.

A loyal Westpac customer for years, Andrea realised loyalty is only of value when it works both ways. Another bank undercut Westpac. "I went to a mortgage broker which was really helpful, they were able to lay out all the different loans on a table for me and then I was able to choose which one was best for, which one suited me the best", Andrea said.

Here's how you can do the same, with our top five tips for taking out a home loan:

#1 compare, print and show. "First of all, compare online, print out the results, walk into your bank manager or your broker with the results", Damien said.

#2 Pay only for what you need. "Don't pay for what you don't need. Just like cars or airlines, there are additional features or options with home loans and if you don't need it then don't pay for it. For example an offset account".

#3 Engage your bank manager. "Don't assume that your bank manager won't negotiate with you -- they invariably will, particularly if you're the kind of customer who's income is going to grow over time".

#4 The comparison rate. "The fourth tip is there's a little trick called the comparison rate, so most banks will show you their headline interest rate -- what you need to look at is the comparison rate that includes fees and charges and it shows the average rate you'll pay over the life of the loan. That's the real way to compare loan A to loan B".

#5 Ignore intro rate loans. "For most borrowers, particularly first time borrowers, the idea of an intro rate home loan is probably not the right one. It's very attractive the introductory rate for your first 12 months, but at the end of that honeymoon, like at the end of a lot of honeymoons, the marriage isn't necessarily as good".

In offices and on worksites across the country, breadwinners are wondering how they're going to cover this latest rate rise on top of spiraling food, petrol and power prices. The answer is to put on the gloves and the fight up to the banks -- that's according to economist and founder of money website Switzer dot com dot au, Peter Switzer.

"It's time for us borrowers to stand up and say we are good customers and we demand the best possible deal and if you can't get it, go looking for it somewhere else", Peter said.

He advises us to do our homework and stick to companies we know, though even he would love to see a new wave of competition. "In fact Australia needs another Aussie John -- but unfortunately the money's not cheap overseas", Peter added.

"Australians are borrowed to the highest level, per household, in our history. So every interest rate rise is much more effective than ever before", he said.

For a final tip we could look to a recent homebuyer, none other than Westpac CEO, Gail Kelly who purchased her new estate in April for almost nine million dollars. "I wouldn't be surprised if it (her loan) was less than lots of Australians because those sorts of deals are done as golden handcuffs to keep very successful executives in organisations", Peter said.

As for what happens next, the consensus of economists is that rates will rise one full per cent over the course of next year.

Story links:

Rate City - Compare the real cost of loans from all Lenders

www.ratecity.com.au

Peter Switzer - Economist: www.switzer.com.au