What if they are not? If the loan isn't granted, then the lender will have to go elsewhere, and worse case they will have to sell the property, possibly at a loss. That would seem like it just exposes the bank to more risk? Situation here is that you simply keep paying and the bank doesn't care whether you pay 110% of your income because you are unemployed, or 10% of your income because you got promoted - so long as you are paying.
Stress tests/qualification can therefore be against a "high interest rate" which is typically 7-8%.
What's interesting is that even a 4% interest rate at this point would probably lead to a recession because people are so highly in debt that they would cut saving/spending immediately. That recession would likely see interest rates plummet again. So the "new equilibrium" is a scary low.
As a result, people who bought homes in 2012/2013 will be affected by rising rates as well as a new affordability test. They'll need to prove they could qualify for the loan at 2-3% higher rates in anticipation of the rate environment at their next renewal.
As a result, people who qualified & budgeted for loans at 2.5% in 2013 will suddenly have to be qualified for 6% loan interest within the next few months.
In terms of financial impact, this could represent an additional $1300 monthly expense people will have to budget for on a ~$450,000 loan.