What Is a Mortgage Stress-Test?
With just over a week until the Reserve Bank meets again, we have had a lot of conversations with clients who are feeling uncertain about where rates are heading.
That anxiety is completely understandable. But here's the thing, you don't need to predict the future to feel in control of your mortgage. You just need to know your numbers.
Below is a simple stress-test provided by our finance partners that you can do right now, so you know exactly where you stand if rates move again.
What Is a Mortgage Stress-Test?
A stress test is simply asking: "What happens to my repayments if rates go up, can I absorb it?"
The good news is that lenders already do this when they assess your loan, they're required to assess your ability to repay at 3% above the current rate. So technically, you've already been approved to handle a significant rise. But approval criteria and real life are not always the same.
The Numbers: How Much Would Your Repayments Increase?
The table below shows the approximate monthly repayment increase across common loan sizes for three rate rise scenarios. These are based on principal & interest repayments.
The 3 Question Self Check
Once you know the numbers, ask yourself these three questions:
- Do I have a repayment buffer?
Ideally 3 months of repayments sitting in an accessible account (like an offset). This is your first line of defence.
- Has my income situation changed?
If you've changed jobs, gone to part time, or taken on other debt since your loan was approved, your real world capacity may be different to what was assessed.
- Am I already stretching at today's rate?
If the answer is yes, it's worth having a conversation now about your options.
What Can You Do If the Numbers Look Tight?
You have more levers than you might think:
- Consider a split loan structure — fixing part of your loan gives you cost certainty on a portion while keeping flexibility on the rest.
- Switch to interest only temporarily — this can reduce your minimum repayment in the short term if cash flow is the issue.
- Build your offset balance — every dollar in your offset reduces the interest you're charged, effectively acting as a buffer.
- Have a conversation early — the earlier we look at your options, the more of them you have.
If you’d like to investigate your options email [email protected] and we can put you in touch with our finance professional Justin for a free , no obligation chat.
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