A federal requirement that mortgage applicants must qualify at a higher rate than their actual mortgage rate.
Since 2018, all federally regulated mortgage applicants must qualify at the higher of 5.25% or their contract rate plus 2%. For example, if your actual rate is 4.5%, you must prove you can afford payments at 6.5%. This reduces your maximum borrowing power by roughly 20%. The stress test ensures borrowers can handle future rate increases. As of 2024, the stress test was removed for mortgage switches at renewal. OSFI is reviewing potential changes for uninsured mortgages in 2026.
Related terms: Qualifying Rate | Amortization | Bank of Canada Overnight Rate