What rate do lenders stress test at?

It varies by lender, but most use their SVR plus a buffer (often 1–2%), or a minimum stress rate, whichever is higher. In practice, stress rates typically fall in the 7–8% range. Some lenders use different stress rates for different products — for instance, a lower stress rate for longer fixed-term deals since the risk of rate changes is deferred.

Can I pass the stress test if my income is variable?

Yes, but lenders will assess your income conservatively. If you are self-employed, they typically use the average of two to three years’ earnings. If you receive bonuses or commission, lenders may only count a portion (often 50–75%) toward affordability. Ensuring your income documentation is thorough and up to date will help your application.

Why was I offered less than I expected?

The most common reason is the stress test. Even though you can afford the payments at the rate you are applying for, the lender needs to be satisfied you can manage at a much higher rate. High existing debt, childcare costs, or other regular outgoings can also reduce the amount offered. A mortgage broker may be able to find a lender with different affordability criteria that suits your circumstances better.

What is a Mortgage Stress Test? Meaning Explained

A mortgage stress test is the process lenders use to check that you could still afford your repayments if interest rates were to increase. Rather than assessing affordability at the rate you are actually applying for, lenders test your finances against a higher “stress rate” — typically the lender’s SVR plus a buffer, or a specified minimum rate (often around 7–8%).

This practice was formalised after the 2014 Mortgage Market Review (MMR), which required lenders to ensure borrowers could cope with rate rises over the first five years of the mortgage. The aim is to prevent people from taking on mortgages they could not sustain if the interest rate environment worsened.

Stress testing is one of the main reasons borrowers are sometimes offered less than they expect based on income multiples alone. Even if your income supports a large mortgage at current rates, the lender needs to be satisfied you could manage the payments at a significantly higher rate. This is particularly relevant when base rates are low and there is more room for them to rise.

Example

You apply for a £250,000 mortgage at a rate of 4.5%. Your monthly payment at this rate would be £1,390. However, the lender stress tests you at 7.0%, where the payment would be £1,767 per month. If your income and outgoings cannot support the higher figure, the lender may reduce the amount they are willing to lend or decline the application.