What happens if your mortgage rate rises?

The key point

A rate increase can have a meaningful effect on a long remaining term. Stress-testing your payment is a simple way to see whether your budget has enough room.

Test several rates

Compare your current rate with 4%, 5%, 6% and another scenario that makes sense for your circumstances.

What a mortgage stress test is really doing

A stress test asks a simple question: could the household still manage the mortgage if the interest rate were materially higher? It is useful for both new buyers and existing borrowers because the current payment can look affordable while a future rate change could reduce the room in the household budget.

Try your current rate, then test one or more higher rates. The 1% rate-rise guide gives a worked example, while the repayment calculator lets you change the balance and term.

What to look for in the result

Do not focus only on the new monthly payment. Consider how much spare income would remain after the mortgage, whether you could still save, and whether a rate rise would force you to cut essential spending. A stress test is a planning tool, not a prediction of future rates.