The mortgage stress test

When you apply for a mortgage in Canada, the lender doesn't check whether you can afford the payment at your real interest rate. It checks whether you could afford it at a higher, made-up rate called the qualifying rate (also known as the minimum qualifying rate, or MQR). Under OSFI's Guideline B-20 (OSFI is the federal regulator that oversees banks), every federally regulated lender must qualify you at the greater of two numbers: your contract rate plus 2 percentage points, or a fixed floor of 5.25%. Your contract rate is simply the rate you and the lender agreed on. So if you're offered 4.25%, you get tested at 6.25%; if you're offered 3.10%, the floor kicks in and you're tested at 5.25% instead of 5.10%. This applies to both insured mortgages (down payment under 20%) and uninsured ones (20% or more), and it's confirmed unchanged as of January 2026.

The point is a buffer. If rates climb before your renewal, or if life gets more expensive, the theory is that you were already qualified with room to spare. The practical effect is that it shrinks how much you can borrow: the bank runs your income against a payment you aren't actually making, so a household that could comfortably handle the real payment can still be told no. That's the trade-off baked into the rule.

Here's the part that gets glossed over. B-20 only binds federally regulated lenders: the big banks and most national lenders. Provincially regulated credit unions are not governed by OSFI, so they are not legally required to apply the B-20 stress test at all. Many choose to apply their own version anyway, and some will qualify you at a lower rate, or occasionally at your contract rate alone. The same freedom exists further out on the spectrum with mortgage investment corporations and private lenders, which operate under different rules again. This is real and legal, not a loophole. But looser qualifying is not a free lunch: lenders who take on more risk typically price it back in through higher interest rates, extra fees, or shorter terms, and a mortgage you can only pass by skipping the buffer is, by definition, one with less margin for error.

Two things worth knowing. First, the "plus 2%" side is almost always the binding number, not the 5.25% floor: with five-year fixed rates sitting around 4% to 4.3%, the qualifying rate lands near 6% to 6.3%, well above the floor. The floor only matters when rates fall low enough that contract-plus-2 drops beneath 5.25%. Second, renewals are treated differently, and the rule here changed in your favour. Since November 21, 2024, OSFI no longer requires a fresh stress test on an uninsured "straight switch": moving your existing mortgage to a new federally regulated lender at renewal with the same loan amount and the same remaining amortization (the balance can only creep up by about $3,000 to cover switch costs). That change was made specifically to stop the stress test from trapping borrowers with their current lender, so you can shop other banks at renewal without re-qualifying. Two caveats: the exemption covers straight switches only, so if you want to borrow more or stretch your amortization you get treated like a new applicant and tested again; and the new lender still runs its own underwriting, it just isn't bound to the prescribed qualifying rate.