Mortgage application stress test

NS8685

Hello

I’m going to be applying for a mortgage shortly and am aware that a stress test is done as part of this to ensure I could afford the payments if interest rates rise. Can anyone please tell me roughly the interest rate currently used when stress testing mortgage applicants? Am I right in understanding that I would then need to be able to show I could still meet the payments at the stress test rate by having a certain amount of money left over each month?

Any advice would be very gratefully received.

Thank you!

poppy10_2

NS8685 wrote: »

Can anyone please tell me roughly the interest rate currently used when stress testing mortgage applicants?

Three percent above the standard variable rate (the rate at which the mortgage will revert to after any discounted fixed period).

Most banks SVRs are between 4 and 5 percent so the stress test would be to see if you could make payments with a mortgage of 7 to 8 percent.

wazza07

We recently went through this and our lender used 9.95% for the stress test. We had a monthly figure in our mind that we wanted to pay which was affordable at the moment, but based on 9.95% wasn’t. In the end we had to reduce our payment but extend the mortgage term over a few more years.

ACG

It varies from lender to lender.
But it is not whether you deem it to be affordable, it is whether the lender deems it affordable.

Have a play around on the lenders affordability calculators, that will tell you what they will be prepared to lend.

LRmortgage

Yep, I agree with ACG.
Different lenders use different affordability calculations.
Go onto the lenders websites and key in your basic details and you’ll get some borrowing figures to work from.
Alternatively. Speak to a broker and they’ll do the hard work for you.