Non-major bank sets lowest floor rate

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ME Bank dropped its serviceability rate to 5.25%. It is the lowest floor rate following the Australian Prudential Regulation Authority’s (APRA) revision to its serviceability assessments for residential mortgage applications.

Before ME Bank’s serviceability rate cut, Macquarie Bank had the lowest rate at 5.30%.

The non-major bank also increased its buffer rate to 2.5%, above the offered interest rate for all home loan applications, which took effect on 2 August.

“This change appropriately reflects Australia’s new low rate environment and opens up lending to more home loan customers,” the bank said in a statement.

ME Bank is one of many lenders who welcomed APRA’s decision allowing deposit-taking institutions to review and set their minimum interest floor.

APRA eased its home-loan serviceability restrictions in July, allowing lenders to assess a borrower’s ability to repay their mortgage if interest rates rose to 7%. It would let buyers borrow more, according to experts.

The lenders that have responded to the change include Commonwealth Bank, Australia and New Zealand Banking Group (ANZ), Westpac, National Australia Bank (NAB), Macquarie, Suncorp, Bendigo and Adelaide Bank, Auswide Bank, Bank of Sydney, Teachers Mutual Bank, Advantedge, and Bankwest.

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