Interest Rate Stress Test
Frequently asked questions
What is a mortgage stress test in NZ?
A stress test calculates your mortgage repayments at a higher hypothetical interest rate — typically 2% above your current rate — to check whether you could still afford payments if rates rose. NZ banks apply their own internal stress test rates (often 8–9.5%) when assessing loan applications under CCCFA guidelines, regardless of the rate you will actually pay.
What interest rate should I use for a stress test?
A common approach is to test at 2% above your current rate. If you are currently paying 6.5%, test at 8.5%. For a conservative scenario matching bank stress tests, use 8–9.5% as the absolute stress rate rather than a relative increase.
How does the CCCFA affect NZ mortgage affordability?
The Credit Contracts and Consumer Finance Act requires NZ lenders to verify that borrowers can afford repayments without hardship. Banks apply a stress test rate significantly above the actual rate offered, which can reduce the amount approved compared to older affordability models.
What should I do if my stress test result shows high pressure?
If your repayments increase by more than 20% in the stress scenario, review your financial buffer — whether you have savings or income headroom to absorb the increase. Consider fixing for a longer term for certainty, building an emergency fund, or discussing your options with a mortgage adviser.