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 was based on the higher of:

  • A serviceability “buffer” that is set at 2.25% p.a. above the interest rate applied
  • A floor rate of 7.25% p.a.

For example, a customer applied for a home loan with an interest rate of 4% p.a. We used a 7.25% p.a. interest rate to assess the ability to repay their home loan in case interest rates increased. 

What's changing?

On 5 July 2019, the assessment rate was reduced and the serviceability buffer was increased. This is how the assessment rates have changed; the highest rate will still be used:

  • A serviceability buffer that is set at 2.5% p.a. above the interest rate applied
  • A floor rate of 5.75% p.a.

In the example of the customer who applied for a home loan with a 4% p.a. interest rate, serviceability would now be determined at a rate of 6.5% p.a. rather than 7.25% p.a.

These changes became effective 22 July 2019.

What this means for you

If you’ve applied for a home loan conditional pre-approval with us, you could now be re-assessed using the new assessment rates – either at the 5.75% p.a. floor rate, or at 2.5% p.a. more than the actual interest rate you have chosen, whichever is higher. 

Our new assessment rates may allow you to borrow more with us, either with a new home loan or when topping up an existing CommBank home loan.

Things you should know

Subject to credit approval. Fees, charges, terms and conditions apply. As this advice has been prepared without considering your objectives, financial situation or needs, you should consider its appropriateness to your circumstances before acting on the advice. You should also read our Financial Services Guide.