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ME revises serviceability and LVR policies

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Reporter 2 minute read

ME Bank has made changes to its credit policy in response to APRA’s revised home lending guidance.

ME is the latest bank to announce changes to its home loan serviceability assessment policy in response to the Australian Prudential Regulation Authority’s (APRA) revised home lending guidance. 

As a result, the non-major bank will decrease its serviceability floor rate to 5.25 per cent p.a. and increase its buffer rate to 2.50 per cent p.a. above the offered interest rate for all home loan applications, effective from Friday (2 August).

“Whichever rate is higher will be applied when assessing home loan applications,” ME’s announcement stated. 

“This change appropriately reflects Australia’s new low rate environment and opens up lending to more home loan customers.”

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ME joins a long line of lenders who welcomed APRA’s decision to allow authorised deposit-taking institutions (ADIs) to review and set their own minimum interest rate floor for use in serviceability assessments and utilise a revised interest rate buffer of at least 2.5 per cent over the loan’s interest rate.

The lenders that have responded to the change include: Heritage Bank, ANZ, Westpac, the Commonwealth Bank, NAB, Macquarie, Suncorp, MyState Bank, Bendigo and Adelaide Bank, the Bank of Sydney, Auswide Bank, Teachers Mutual Bank, Advantedge and Bankwest

Additionally, ME Bank announced that it has increased the loan-to-value ratio cap for interest-only investment loans from 80 per cent to 90 per cent. This change also effective from Friday (2 August).

[Related: Major bank announces new risk weight floors]

ME revises serviceability and LVR policies
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