Mortgage Stress Test
The Canadian mortgage stress test, enforced by the Office of the Superintendent of Financial Institutions (OSFI) helps evaluate a potential homeowner’s financial stability, ensuring they can still afford their mortgage in case of higher interest rates or financial challenges. The stress test uses theoretical rates to assess a borrower’s ability to stay under debt service ratios. Lenders consider these ratios when deciding how much to approve. The stress test measures a borrower’s ability to handle increased rates or expenses to discourage borrowers from overextending their financial capacity.
Who It Affects:
- The Canadian mortgage stress test applies to anyone applying for a mortgage from a federally regulated lender, including those refinancing or renegotiating a mortgage. The test also applies to those taking out a home equity line of credit (HELOC).
- Those renewing with the same lender or switching lenders at the time of renewal are generally exempt from the stress test.
The stress test is designed to prevent people from taking on unmanageable debt.
Qualifying Rate:
The stress test uses a minimum qualifying rate (MQR) to determine if a borrower qualifies for a mortgage. The MQR is based on either the standard rate or the rate offered by the lender plus 2 per cent.
- Currently, the qualifying rate is 5.25 per cent or the contracted rate plus 2 percentage points – whichever is higher.
- In 2025, OSFI has announced that the rates will remain the same for both uninsured and insured mortgages.
More information is available on the Government of Canada website:
Note: TRREB provides this information as a guide. The Toronto Regional Real Estate Board assumes no responsibility for the accuracy of this information. Please discuss any inquiries with a qualified professional.