Why do rate changes affect max offered loan on variable rate mortgages?

seems strange that changes in the rate impact the maximum loan a bank will offer, given they are 30 year mortgages... I would have thought the default risk assessment from the banks perspective wouldn't change. Any borrower who actually decides how much they choose to borrow for a home based on the current rate (rather than long term worst case) is, in my view, idiotic. Why don't the banks agree?