What is the mortgage stress test?

In Canada, the mortgage stress test checks that you could still afford your mortgage if interest rates were higher. Federally regulated lenders must qualify you at the greater of your contract rate plus 2 percentage points, or 5.25%. The qualifying rate limits how much you can borrow but does not change what you pay.

How the stress test works

Your contract rate is the rate in your mortgage agreement, the one you pay. Your qualifying rate is the higher rate the lender uses only to test affordability. The qualifying rate is the greater of:

• your contract rate plus 2 percentage points, or
• 5.25%, OSFI's minimum qualifying rate.

OSFI, the federal regulator of banks, sets this floor for uninsured mortgages. The Department of Finance applies the same test to insured mortgages, those with less than 20% down. The stress test also applies when you refinance or take out a home equity line of credit with these lenders.

The lender plugs the payment at the qualifying rate into two ratios. GDS (gross debt service) is your housing costs as a share of gross income; TDS (total debt service) adds your other debts. For insured mortgages, CMHC's limits are 39% and 44%. If your ratios fit at the qualifying rate, you pass.

A worked example of the qualifying rate

These figures use an illustrative 5% contract rate, not a quote and not a rate on offer.

At an illustrative 5%, the qualifying rate is the greater of 7% and 5.25%, so the lender tests at 7%. On a $500,000 mortgage over 25 years, the payment at 5% is about $2,908 a month; at 7%, it is about $3,502. The lender checks your ratios using $3,502, although you would pay about $2,908.

If the contract rate were an illustrative 3%, the test rate would be 5.25%, because 3% plus 2 is below the floor.

Where the stress test applies and where it does not

Banks and other federally regulated lenders must apply the stress test. Ontario credit unions are provincially regulated and set their own qualifying rules. Many credit unions use a similar test, but the details can differ. Different qualifying rules are one reason we compare more than one type of lender.

At renewal, the rules are kinder. Since November 21, 2024, OSFI does not expect the test when an uninsured mortgage moves to another federally regulated lender without increasing the amount or the amortization (the total time to pay the loan off). Insured mortgages can also switch at renewal without re-qualifying (source: Canadian Mortgage Charter, Financial Consumer Agency of Canada briefing note, checked October 2026). Borrow more, and the test applies again.

Alternative lenders, sometimes called B lenders, are trust companies and other lenders with more flexible rules. Alternative lenders may qualify borrowers differently, usually at a higher cost. We look at alternative lenders only after the bank, credit union and monoline options.

What to do next

To see how the stress test affects your budget, try the affordability calculator; results are estimates only, not an offer or advice. Or use our call-me-back form and we will run the numbers with you.