Your debt-to-income ratio looks fine today. Would it survive a rate rise?
TL;DR: Debt-to-income ratio is calculated at today's rates and today's income — it doesn't account for what happens to your floating-rate debt if rates rise, or what happens to the ratio itself if income drops. A stress-tested version of the ratio, recalculated under both conditions, is a much more honest picture of your real debt risk.
What a standard DTI ratio actually captures — and misses
Debt-to-income ratio (total debt payments divided by income) is a useful snapshot, but it's exactly that — a snapshot. It doesn't distinguish fixed-rate debt (which won't move) from floating-rate debt (which will), and it assumes your income stays exactly where it is today, neither of which is fixed.
How to build a stress-tested version
- Split your debt payments into fixed and floating-rate portions.
- Apply a realistic rate increase (commonly 1-2 percentage points) only to the floating-rate payments.
- Recalculate your total debt payment under the higher rate.
- Apply a realistic income drop on top, and recalculate the ratio a second time using the lower income.
The number that results — your ratio under combined rate-and-income stress — is usually meaningfully higher than your current ratio, and it's the one that actually predicts risk during a real downturn.
Why this catches risk a "healthy" ratio can hide
A household with a comfortable-looking ratio today, but a high share of floating-rate debt and modest income stability, can be significantly more exposed than a household with a slightly higher current ratio but entirely fixed-rate debt and stable income — the raw number alone doesn't distinguish these two very different risk profiles.
Get your stress-tested debt picture
Our Debt Resilience Report lists every debt you carry, applies a rate stress specifically to the floating-rate share, tests an income drop on top, and shows you the real combined-stress ratio — plus the exact prepayment-versus-liquidity trade-off for reducing it.
Frequently asked questions
What's the difference between debt-to-income ratio and a stress-tested debt ratio?
A standard DTI ratio uses your current income and current debt payments. A stress-tested version recalculates the ratio after applying a realistic rate increase to floating-rate debt and a realistic income drop — showing your real exposure, not just a current snapshot.
Why does a good debt-to-income ratio not guarantee safety?
Because the ratio doesn't distinguish fixed-rate debt (which won't change) from floating-rate debt (which will rise with rates), and it assumes your income stays constant — two assumptions that don't hold during a real economic stress period.
How much can I stress-test interest rates by?
A commonly used realistic scenario is a 1-2 percentage point rise, though the appropriate size depends on your specific market and loan terms.
What can I do if my stress-tested ratio is too high?
The two main levers are prepaying debt (particularly the floating-rate portion) to reduce future exposure, or maintaining a larger liquidity buffer to absorb the higher payments if rates do rise — a debt resilience report calculates the specific trade-off between these two options.