Stress testing explained: the reverted rate that decides your borrowing

You find a mortgage at 4.4%. You can afford the payment. But the lender says you can only borrow £180,000, not the £220,000 you expected. The reason is the stress test - and it is the single biggest source of 'why can't I borrow more?' conversations we have.

What the stress test actually is

When a lender works out how much you can borrow, they do not use the rate you will actually pay. They use a higher 'reverted' or 'stress' rate, to make sure you can still afford the mortgage if rates rise. Typically this is your pay rate plus 1%, or a floor set by the lender (often around 8% to 9%), whichever is higher.

So even though your deal is 4.4%, the lender checks whether you can afford payments at, say, 8%. If you cannot, they cap the loan.

Why it exists

After the financial crisis, regulators required lenders to stress-test borrowers so that a rate rise would not push them into default. The rules have softened slightly, but most lenders still apply their own stress rate as a matter of prudent lending.

How it caps your loan

The stress test is applied to your disposable income after committed expenditure. The higher the stress rate, the less disposable income is left, and the lower the loan. This is why two lenders quoting the same pay rate can offer very different loan sizes - their stress rates differ.

What you can do

We model your affordability against each lender's specific stress rate before you apply. Some lenders stress at pay rate plus 1%; others use a higher floor. Knowing which lender uses the most favourable stress test for your income profile can add tens of thousands to your borrowing ceiling.

We do not promise a number we cannot deliver. We tell you what you can actually borrow - stress-tested, real, and ready to take to an estate agent.