How to read a stress test

A stress test shows whose cash runs out, and when, if things you do not control move against you. It runs the projection as recorded, the baseline. Then it runs it again with the changes you choose.

For each legal owner whose cash runs out, it gives two figures. Needs cash from is the date. Additional cash is the amount that would keep their lowest balance at the cash reserve. Those are the figures to read.

What it changes

The scenario has a few levers. An interest rate increase adds percentage points to loan interest. A living expense increase adds a percentage to living expenses. A reduction takes a percentage off any income source, any property's rent or any transfer that funds a company or trust.

Each change runs for the whole projection. Everything else stays as recorded, so the result shows the effect of the change alone. A two point rate rise on a household's loans is a specific monthly figure, and the test shows it beside the month as recorded.

Baseline against stressed

Stress outcome sets the average month this financial year beside the same month Under stress, with the Monthly change between them.

Cash needed by legal owner then lists each owner who needs cash. For each, it gives the Additional cash, the date it Needs cash from, the Lowest cash and the Greatest need.

If no owner's cash runs out, the household can absorb the change. If one runs out in two years, the plan needs a response before then.

The response

A property sale response tests whether selling would close the gap. It is a test, not a recommendation. You choose up to three properties, each with its contract and settlement dates.

The test shows each sale's proceeds, selling costs, debt repaid and the cash it releases before tax. Then it shows each owner's cash after the sales. Run it with no sale and again with one, and compare the owners' cash.

What it leaves alone

The test does not change property values or the tax rules. It does not assume the market recovers. So a result that holds up under it rests only on the records and the changes you chose.