How is the OSFI B-20 mortgage stress test calculated?

Direct answer

Uninsured borrowers qualify at the higher of the contract rate plus 2 percentage points, or 5.25%, not at the rate they were quoted. The rule binds every federally regulated lender, which means the big banks and most mortgage finance companies. The qualifying rate is used to compute the borrower's GDS (Gross Debt Service ≤39%) and TDS (Total Debt Service ≤44%) ratios; if either ratio exceeds the cap at the qualifying rate the loan is declined regardless of what the borrower could afford at the contract rate. The same test applies to insured mortgages (CMHC/Sagen/Canada Guaranty), enforced via the Department of Finance "minimum qualifying rate" rule. Effective November 21, 2024, OSFI removed the stress test for mortgage RENEWALS where the borrower switches lenders without increasing principal, a significant change that ended what regulators called "renewal entrapment." For new purchases and refinances the stress test still applies. Worked example: a 5-year fixed at 4.95% must qualify the borrower at MAX(4.95% + 2%, 5.25%) = 6.95%. On a $700K mortgage that's about $480 more per month in qualifying-payment math, enough to drop a buyer's borrowing capacity by roughly 15%.