ME Bank has followed most of Australia's major banks, regionals, and mutual banks in moving to align its home lending policy with APRA's serviceability guidance changes, which were announced at the start of July. APRA removed the 7 per cent floor rate, and consequently ME is to decrease its serviceability floor rate to 5.25 per cent. In line with APRA's guidelines, ME will also increase its buffer rate to 2.50 per cent above the offered interest rate. The new rates will be applied to all home loan applications, effective from today (2 August 2019). The move brings ME broadly in line with the major banks, Macquarie, and Suncorp, which changed their home lending credit policies to reflect APRA's guidance in mid-July, followed a week later by the likes of Auswide, Bank of Sydney, Bendigo and Adelaide Bank, and MyState.ME is also set to lift its loan to value ratio cap for interest-only investment loans from the current 80 per cent to 90 per cent, effective from today (ie, 2 August 2019).Jon Denovan, special counsel at Dentons Australia, noted in a blog yesterday on APRA's changes to ADI serviceability rules that other regulators, such as the Australia Financial Complaints Authority, "and probably the Australian Securities and Investments Commission", will apply APRA's guidance to non-ADI lenders."APRA considers it good practice to use a single set of serviceability criteria across all mortgage products, but an ADI can choose to use different serviceability criteria, including multiple buffers and floor rates, for different products," Denovan noted. He added that APRA "considers it good practice for a prudent ADI to apply its interest rate buffers and floors to the actual rate to be paid by the customer (but excluding honeymoon rates and discounted introductory rates), rather than the standard variable rate".If different rates are used, the regulator will expect the ADI to articulate the rationale for using differential criteria and any implications for its risk profile and risk appetite.