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Can you cope with a 4 per cent rate rise?

23/06/2010

Mortgage borrowers should have their financial positions compulsorily ‘stress tested’ just as banks have their financial positions regularly stress tested by the banking system regulator APRA. The Institute of Actuaries told a senate committee last month that anyone who is undertaking a major financial commitment such as a mortgage should have to undergo a financial stress test before the commitment is made.

A stress test would look at how the borrower might cope with rate rises of up to three or four per cent. Currently lenders usually investigate how a borrower might cope if rates were to go up about 2 per cent. Rates have risen 1.5 per cent since last October and some economists expect rates to go up another 1.5 per cent by the end of 2011.

Source: Sydney Morning Herald



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