Model your monthly mortgage repayment, see how it changes under the regulatory +3 percentage-point stress test, and check it against a 35%-of-income affordability line.
Monthly repayment follows the standard amortization formula M = P·r(1+r)^n / ((1+r)^n − 1), where P is the loan (house price minus deposit), r is the monthly interest rate, and n is the number of monthly payments. Total interest over the term is M·n minus P.
UK mortgage regulation has historically required lenders to check that a borrower could still afford repayments if their interest rate rose by roughly 3 percentage points above the offered rate. This protects against a rate shock during the term — exactly the scenario that played out as the Bank of England raised its base rate from 0.1% to over 5.25% between late 2021 and 2023, pushing typical new fixed rates from roughly 2% to 6–8%.
Loan-to-value (LTV) is the loan as a percentage of the property price — a 15% deposit gives an 85% LTV. Payment-to-income compares the monthly repayment against an approximated net monthly income (gross annual income × 0.75 ÷ 12); many affordability guidelines treat repayments above roughly 35% of net income as a stretch, which the chart flags in red.
This simulation runs the standard amortization formula lenders use to compute a fixed monthly repayment, then repeats the calculation with the interest rate raised by 3 percentage points — the regulatory stress test UK lenders apply to confirm a borrower could withstand a future rate rise. It compares both figures against an approximate affordability threshold of 35% of net monthly income.
Two bars: your monthly repayment at the current interest rate, and the same repayment recalculated at rate+3 percentage points. A dashed green line marks 35% of your approximate net monthly income — a bar turns red if the repayment crosses it.
Set house price, deposit percentage, interest rate, mortgage term and gross annual income. Watch how a larger deposit lowers loan-to-value and the monthly payment, and how a rate rise of just 3 percentage points can push a comfortable payment past the affordability line.
Between late 2021 and 2023 the Bank of England raised its base rate from 0.1% to over 5.25%, and typical new fixed mortgage rates rose from roughly 2% to 6–8% — almost exactly the +3pp stress-test scenario lenders had already been required to check borrowers against.
Using the standard amortization formula M = P·r(1+r)^n / ((1+r)^n − 1), where P is the loan amount (house price minus deposit), r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments (years × 12). This produces a fixed payment that covers both interest and principal over the term.
UK lenders have historically been required to check whether a borrower could still afford their mortgage if interest rates rose roughly 3 percentage points above the offered rate. This simulation recalculates the monthly payment at rate+3pp to show the same test.
Lower LTV (a bigger deposit relative to price) generally secures better interest rates and lower risk for the lender. Many UK mortgage products are tiered around LTV bands such as 60%, 75%, 85%, 90% and 95%, with rates typically rising as LTV increases.
This is a simplification to approximate take-home (net) income after income tax and National Insurance, since exact net pay depends on tax code, pension contributions and other deductions. Real affordability assessments use a borrower's actual net income and outgoings, not a fixed percentage.
Because the amortization formula is non-linear in the interest rate, and mortgage terms are long (typically 20–35 years), so a few percentage points compound significantly over hundreds of monthly payments. This is precisely why the stress test exists — a rate rise that looks small monthly can still take a borrower from comfortably affordable to overstretched.