Borrowing Rules · 28 September 2026 · Written by Arapeta Albert, Financial Adviser (FSP433026)
Every NZ lender checks whether you could still pay if rates rose. The rate it checks at is its own number, and it does not move when your rate does.
In this article
When you apply for a home loan in New Zealand, the lender checks whether you could keep paying if interest rates went up. It works out your repayments at a test rate (also called a servicing or sensitised rate) that is higher than the rate you would actually pay, on principal and interest, and compares them with your income after tax, your living costs and your other commitments. If what is left over does not cover them, the lender offers less or says no.
That is the stress test. It is not a Reserve Bank rule. It comes from the lender's responsible lending obligations: the Responsible Lending Code, the guidance that sits under the Credit Contracts and Consumer Finance Act, says that where the interest rate can vary a lender "should take account of the risk that interest rates may rise" (Source: Responsible Lending Code, July 2024). Since 1 July 2026 the Financial Markets Authority has been the regulator for that Act (Source: FMA).
For the three limits that together decide your borrowing power, start with our pillar guide on how much you can borrow in NZ. This article is about the one of the three that most people never see.
No, and the shared name causes real confusion. The Reserve Bank stress tests the banks: it checks whether their balance sheets could survive a severe downturn. The mortgage stress test is a bank testing you.
The Reserve Bank does not set a test rate for home loans. Its own lending rules are the loan to value and debt to income restrictions, which our tracker of the current NZ lending rules keeps up to date. The test rate is each lender's own policy.
The Responsible Lending Code gives lenders three ways to allow for rising rates. A lender might:
Only the second design moves with your rate. In practice each of the large banks works to its own test rate, a number it sets and reviews itself. The evidence is in how they behaved this year. When the Reserve Bank lifted the OCR from 2.25% to 2.50% in July 2026 (Source: RBNZ), all five of the largest banks told interest.co.nz their test rates had not moved (reported 13 July 2026). One of them put it plainly: test rates "are not a prediction of future interest rates".
Test rates are not on any rate card, so this article quotes none. They change on each lender's own timetable and a figure printed today would be wrong by the time you apply.
Most explanations describe the test as "your rate plus a couple of percent". That makes the buffer sound like a constant. When the test rate is a number the bank sets for itself, the buffer is the thing that moves, because it is simply the gap between the test rate and the rate you actually pay.
Two things follow. First, the rate in the headlines is not the rate that decides your approval; the test rate is. A fall in advertised rates does not lift your borrowing power until a lender moves its test rate, which is why our NZ borrowing power tracker shows the tested figure separately and lets you change the margin to see how much it matters.
Second, passing the test tells you about the lender's margin, not yours. In a rising market, an approval granted at an unchanged test rate carries a thinner cushion above the repayments you will actually make than the same approval did a year earlier. Nothing on the approval letter says so.
In our experience at Trebla, applications that miss the stress test usually miss it by a small amount, and the small amount is usually in the detail rather than the income.
More than the new loan. The detail is where most surprises come from:
The stress test is also not the only gate. The debt to income restriction ignores interest rates entirely, so which one binds can swap as rates move; how DTI works in NZ covers that.
Because every input above is the lender's choice: its test rate, its expense benchmark, how it treats credit limits, how much of your overtime, rental or self-employed income it counts. Two lenders can run the same file and reach different numbers without either being wrong.
So a stress test decline is one lender's filter, not a verdict on the household. It also means the test rate at the moment you apply matters, since a lender that moves its rate changes the answer without anything about you changing.
These are the inputs a lender's calculation responds to. Each has a trade-off, which is why they are worth weighing with someone who can see the whole picture:
None of this makes a stretched budget comfortable. The test protects the lender against rates rising; whether the repayments suit your life is a separate question, and one a Financial Adviser can work through with you.
It is the check a lender runs on a mortgage application to see whether you could keep up the repayments if interest rates rose. The lender works out principal and interest repayments at a test rate that is higher than the rate you would actually pay, and compares them with your income after tax, living costs and other commitments. If the surplus does not cover them, the lender offers less or declines. The Responsible Lending Code says a lender should take account of the risk that interest rates may rise.
Each lender sets its own test rate and reviews it on its own timetable, so there is no single figure, and it is not part of the advertised rate card. It sits well above the rates on offer. Because it changes, any number quoted goes stale; the rate that matters is the one the lender assessing your application is using on the day it assesses it.
No. The Reserve Bank stress tests the banks themselves, checking whether their balance sheets could survive a severe downturn. The mortgage stress test is a lender testing an individual borrower. The Reserve Bank does not set a test rate for home loans; its own lending rules are the loan to value and debt to income restrictions.
Not automatically. Test rates are set by each bank and are often changed around Reserve Bank decisions, but they do not track the OCR one for one. When the OCR rose from 2.25% to 2.50% in July 2026, all five of the largest banks told interest.co.nz their test rates had not moved. A bank can equally hold its test rate when rates are falling.
Usually, yes. The Responsible Lending Code says that for revolving credit a lender should take into account that a borrower may use credit up to the limit, so lenders generally assess the limit rather than the balance. An unused limit can reduce the amount a lender is prepared to offer even though it costs you nothing today.
Because the test is not run at the repayment you would actually make. It is run at a higher rate, on principal and interest, often over the whole of your borrowing, with credit limits treated as drawn and living costs compared against a benchmark. Lenders run it differently, so a decline from one lender is that lender's answer rather than the market's. Trebla Partners Limited (FSP728251) works across the market, and you can book a chat at book.trebla.nz.
Useful tools and guides
This article is general in nature and is not financial advice. It is published by Trebla Partners Limited (FSP728251), a licensed Financial Advice Provider. Lending criteria, lender policies, test rates and relevant settings vary between lenders and change regularly. Always seek advice specific to your situation before making decisions. Read our disclosure statement →
