Westpac has said it would be lowering its floor rate from 5.75 per cent to 5.35 per cent on 30 September across all Westpac Group brands, including Westpac, Bank of Melbourne, BankSA, RAMS and St.George.

It follows on from its July decision to reduce its interest rate floor for home loan serviceability assessments from 7.25 per cent to 5.75 per cent (and increase its buffer from 2.25 per cent to 2.5 per cent) off the back of the Australian Prudential Regulation Authority’s decision to scrap its 7 per cent interest floor and raise its buffer to 2.5 per cent.

As such, the serviceability assessment rate (SAR) will change.

Westpac advised that should a loan’s variable rate and the 2.5 per cent buffer equate to less than the 5.35 per cent floor when combined, then the floor rate would be used for the serviceability assessment.

However, should the variable rate and buffer be greater than the floor rate (5.35 per cent) when combined, then this figure would be used for the SAR instead.

Speaking of the reduced floor rate, Westpac Group’s general manager of home loans, Will Ranken, commented: “Westpac Group continually reviews its home loan products and services in line with market conditions and customer needs.

“Following careful consideration, we have decided to decrease the serviceability assessment floor rate from 5.75 per cent p.a. to 5.35 per cent p.a. for all Westpac Group brands.

“We are committed to helping customers into their homes, and this change may have a positive benefit for qualified borrowers looking to take out a loan for a property.”

It brings the floor rate in line with that of Macquarie, which previously had the lowest floor rate of the main mortgage lenders.