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How does a lender assess my ability to meet my loan repayments?

The Australian Prudential Regulation Authority (APRA) has legislated that all borrowers need to be able to prove they can make repayments at least 3% higher than their actual loan rate, in order to receive a loan.

All banks and other lenders are legally required to enforce this form of “stress testing” to ensure you can afford your mortgage repayments, if and when interest rates rise.