Mortgage stress-test

Stanleigh

I’m trying to work out how the banks calculate the mortgage stress-test for affordability. I think most banks use a 2% uplift on the mortgage rates to calculate the affordability, but what I am not sure about, is the baseline percentage they are using.

Let’s say I apply for a €230,000 mortgage with BOI – fixed rates for the first 3 years at 3.6% and the standard variable currently is 4.1 %.

Do they stress test the payments based on the 3.6% or the 4.1% >>> so the stress tested payments would be either 5.6% or 6.1%. Below are some crude calculations, based on €230k over 30 years. Based on the numbers below, I would need to prove the ability to pay of €1,393 at a minimum to qualify for the above mortgage, assuming I fulfill all other criteria.

3.6% = €1,046
4.1% = €1,111
5.6% = €1,320
6.1% = €1,393

In the grand scheme of things this doesn’t make a big difference, but curious to see if anyone has any recent experience with the lenders and how strict they are on the affordability calculations and at what base rate do they base the stress test on.

Trish56

Lenders always stress test on the variable rate by 2%.