Which of the following is commonly considered a 'stress test' interest rate for uninsured mortgages in Canada?

Question: Which of the following is commonly considered a 'stress test' interest rate for uninsured mortgages in Canada?

Answer options:

• The contract interest rate plus 0.5%
• The Bank of Canada's overnight rate ✅ The greater of the contract rate + 2% or 5.25% (as per B-20 rules, subject to change)
• The average of the previous year's five-year fixed rates.

Correct answer: The greater of the contract rate + 2% or 5.25% (as per B-20 rules, subject to change)

Explanation: For uninsured mortgages, OSFI's Guideline B-20 (for federally regulated lenders) requires qualification at the greater of the contractual mortgage rate plus 2% or a floor rate (currently 5.25%, but subject to change by OSFI). This is the 'stress test'.