A potential borrower is applying for an uninsured mortgage with a federally regulated financial institution in Canada. According to OSFI B-20 guidelines, how will their qualifying interest rate be determined for the stress test?

Question: A potential borrower is applying for an uninsured mortgage with a federally regulated financial institution in Canada. According to OSFI B-20 guidelines, how will their qualifying interest rate be determined for the stress test?

Answer options: ✅ The greater of their contract interest rate plus 200 basis points, or 5.25%.

• Their contract interest rate plus 200 basis points.
• The Bank of Canada's overnight lending rate plus 200 basis points.
• The greater of their contract interest rate or the Bank of Canada's benchmark qualifying rate.

Correct answer: The greater of their contract interest rate plus 200 basis points, or 5.25%.

Explanation: The OSFI B-20 guidelines for uninsured mortgages specify that the qualifying rate used for the stress test will be the greater of the contractual mortgage rate plus 200 basis points, or 5.25% (this benchmark rate is subject to change but was 5.25% at the time of the guideline's last review for uninsured mortgages). This ensures borrowers can still afford payments if interest rates rise.