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Home loan assessment rate
What's an assessment (floor) rate?
Banks are required to assess their customers’ ability to repay their home loan based on an interest rate that is higher than their actual rate. This is to protect the customers’ ability to repay their home loan in the event of interest rate rises.
The assessment rate applied is based on the higher of:
- A serviceability “buffer” that is set at 3.00% p.a. above the interest rate applied or
- A floor rate of 5.40% p.a.
For example, a customer applied for a home loan with an interest rate of 4% p.a. We would use a 7.00% p.a. interest rate to assess the ability to repay their home loan in case interest rates increased.