Stress testing on fixed rate mortgages

[Harlequin]

"You are on a 3 year fixed rate with IIB because you get more money that way. They assess your ability to repay at 4.99% (3 yr fixed) and not the 6.95% (variable +2%) they would.

It seems that if they did stress test you, you wouldn't get what you want.

Bob"

(Following on from Headachecity's post about good rates on a 95% loan, where Bobk made the above comment)

I hadn't realised that stress-testing didn't apply to longer-term fixed rate mortgages. Does it not apply at all or do they only stress test +1% rather than +2%?

It makes sense, in that obviously your repayments cannot rise during the period of the fixed rate, but do they consider what might happen if rates rise during the fixed period - that you might come off your fixed rate into a significantly higher rate?

PTSB offer a 2 year fixed rate for their 100% mortgage - would this be stress-tested or not? Would asking for it to be fixed for three or four years mean they wouldn't stress test you so you'd be approved for more?

I know about not fixing in an effort to time the market. If we decide to buy this year, it would be very important for us to have certainty in our repayments for a few years, even if it meant paying a more in the long-run, so BobK's comment interested me.

 

[DeirdreL]

only banks applying this at the moment is IIB on their 3 year fixed or Capped Tracker rate, Ulster Bank and First Active on their 5 year fixed rate

DeirdreL

www.rea.ie

 

[ClubMan]

I hadn't realised that stress-testing didn't apply to longer-term fixed rate mortgages. Does it not apply at all or do they only stress test +1% rather than +2%?

Do you mean that individual lenders simply don't do it or that IFSRA/CB don't require it?

 

[Harlequin]

only banks applying this at the moment is IIB on their 3 year fixed or Capped Tracker rate, Ulster Bank and First Active on their 5 year fixed rate

DeirdreL

www.rea.ie

Thanks Deirdre, that's clear now.

ClubMan - I just wanted to know if individual lenders did it - BobK mentioned it and I was curious about it.

 

[bobk]

PTSB offer a 2 year fixed rate for their 100% mortgage - would this be stress-tested or not? Would asking for it to be fixed for three or four years mean they wouldn't stress test you so you'd be approved for more?

PTSB stress on all rates as far as I am aware. They have a new credit policy coming out next week, so wait and see what happens then.

only banks applying this at the moment is IIB on their 3 year fixed or Capped Tracker rate, Ulster Bank and First Active on their 5 year fixed rate

BOS would also not stress on their 5 year fixed rate.

Do you mean that individual lenders simply don't do it or that IFSRA/CB don't require it?

All banks have their own criteria and a different way of doing business. Some banks don't stress on a long term fixed rate and some banks stress +2% on their variable no matter what rate you take.

This trend in not stressing is becoming more popular these days especially considering increases in both house prices and rates.

ESB pushed IFSRA too far when they decided to stress by only 1%, so there is a limit to how far this can go.