So - does that mean that when they assess your application they use the higher interest rate, and then if you are approved you pay the lower rate?
OR do you apply for a home loan and it is assessed at the rate that you'll be paying?

LOL at the higher rate our maximum borrowing power thing comes out with repayments that are STILL less than the rent we are paying per month, it is CRAZY!
Yes, the Banks generally use what they call an 'affordability rate' as per Fuzzywuzzys post but your loan wil be contracted at the 'lower'/'negotiated'/'advertised' rate. HTH