Ruth's mortgage lender will stress test her housing loan repayments to determine if she could make the repayments if:

• A. (i) only.
• B. (i) and (iii) only.
• C. (iii) only.
• D. (i), (ii) and (iii).

Answer: (C)

When lenders assess whether you can keep up with a mortgage, they test you under tougher conditions to see if payments would still be affordable. The key idea is to challenge your cash flow in a way that directly increases the monthly burden.

The most meaningful stress test is the scenario that makes the monthly repayments higher. This directly tests whether, if rates rise or the loan terms change in a way that increases what you owe each month, you could still manage without defaulting. Other possible changes that don’t raise the actual payment amount don’t test this core question of affordability under stress, so they’re not as central to the calculation.

So, the scenario that increases the payment amount is the one lenders focus on for the test, which is why the option describing that condition is considered the relevant stress test. In practice, this reflects the real risk to serviceability: could you still pay if the loan becomes more expensive?