The 7-rate APRA stress test,
explained.
APRA requires Australian banks to assess loan serviceability at the customer rate + 1.5 percentage points. That floor is the minimum, not the answer. SuburbIQ's Tier 3 report runs seven rate scenarios against your actual loan and tells you exactly when the cash position breaks.
The APRA buffer, in one paragraph.
Since November 2021, APRA's Prudential Standard APS 220 has required authorised deposit-taking institutions to assess loan serviceability at a "buffer rate" of at least 3 percentage points above the customer's actual interest rate. Earlier the buffer was 2.5pp. The current effective floor sits at customer rate + 1.5pp at most lenders' policy floor. This is a minimum standard. It's not a recommendation.
Why one number isn't enough.
"Can you afford this loan if rates go up 1.5%" is a yes/no question. The richer question is: how does your cash position change at +1, +2, +2.5, +3, +3.5? Where does it break? How much buffer do you have on the way up? At what rate does the negative gearing benefit flip? At what rate do you need to top up from savings? The APRA floor tells you whether the bank will lend. The seven-scenario stress test tells you whether you'll sleep.
The seven scenarios.
Customer's actual rate (baseline). +1pp. +1.5pp (APRA floor). +2pp. +2.5pp. +3pp. +3.5pp. For each scenario the report calculates: monthly repayment, total annual servicing cost, gross rental income, net rental position, after-tax cash position, and gap to break-even. Cross-referenced against your stated post-tax income to surface the rate at which servicing exceeds 40% of post-tax income — the orthodox upper bound for sustainable property holdings.
Why we extend to +3.5pp.
Australian cash rates rose 4.25 percentage points from May 2022 to November 2023. APRA's 1.5pp floor would have been wrong by 2.75pp. Stress-testing only to the floor would have under-warned every buyer who took a loan in 2021. We test wider because the historical record says wider scenarios are realistic, not extreme.
What the report tells you.
For each tested rate, the report shows green (cash positive), amber (cash neutral within +/- $200/month), or red (negative, top-up required). The break-point — the rate at which you flip from amber to red — is your real risk. Knowing it in advance is the entire point.