Glossary · UK
What is Mortgage Stress Test?
A lender check confirming you could still afford your mortgage if interest rates rose above the current level.
Full Definition
A mortgage stress test is part of the affordability assessment lenders carry out before offering a loan. Rather than only checking that you can afford repayments at the rate on offer today, the lender models a higher rate to confirm you would still cope if borrowing costs increased. This protects both the borrower and the lender against future rate rises and reduces the risk of arrears. The exact stressed rate and method vary by lender, and the rules in this area have evolved over time, so the size of the buffer applied is not fixed across the market. Stress testing works together with income multiples and the debt to income ratio to set the maximum you can borrow. It is one reason the amount a lender will offer can be lower than a simple multiple of salary suggests, particularly when you have other commitments such as credit cards, car finance or childcare costs. Because approaches differ, the same applicant can be offered noticeably different amounts by different lenders, so comparing providers or using a broker is sensible. Always treat any illustrative figure as a guide only, as it varies by lender.