Definition
The mortgage stress test is a regulatory calculation imposed by OSFI Guideline B-20. Instead of qualifying the borrower solely at their contractual rate, the lender must qualify at a "qualifying rate" equal to the higher of: (a) the contractual rate + 2%, and (b) 5.25% ("floor rate").
Example: for a loan at a 5.29% contractual rate, the qualifying rate will be 5.29 + 2 = 7.29%. TDSR and GDSR ratios are calculated on this stressed rate — not the actual rate — to ensure the borrower would survive a marked rate increase at renewal.
Applications: all insured mortgages since 2017, all non-insured mortgages since 2018, all refinances and substantial modifications. Exemption since November 2024: non-insured transfers to a new lender are no longer subject to the test (a pro-competition measure at renewal). Renewals with the same lender have never been subject to the test.