Under the Bank of Canada's stress test, how is the qualifying rate for uninsured mortgages (those with a down payment of 20% or more) determined?

Question: Under the Bank of Canada's stress test, how is the qualifying rate for uninsured mortgages (those with a down payment of 20% or more) determined?

Answer options: ✅ It is the higher of the contract rate plus 2% or 5.25%.

• It is always 5.25%, regardless of the contract rate offered by the lender.
• It is the current prime rate plus a fixed margin of 1.5% as determined by OFSI.
• It is the contract rate initially offered by the lender, without any additional buffer.

Correct answer: It is the higher of the contract rate plus 2% or 5.25%.

Explanation: For uninsured mortgages, the qualifying rate, as per the Office of the Superintendent of Financial Institutions (OSFI) guidelines, is the greater of the borrower's mortgage contract rate plus two percentage points (200 basis points) or 5.25%. This ensures borrowers can still afford their payments if interest rates rise.