How does the stress test impact mortgage affordability?

Jordan Lavin

October 9, 2026

This post was originally published on June 1, 2022, and was last updated on October 9, 2026.

Update: As of November 21, 2024, both insured and uninsured mortgage borrowers are exempt from the stress test when switching to a new mortgage lender at renewal time. The new policy applies to all borrowers making "straight switches", meaning their original mortgage amount and amortization period remain the same.

The mortgage stress test limits how much mortgage Canadians can qualify for, and how much it bites depends on the rate you’re offered. What does the stress test mean for you and your homeownership dreams? Let’s take a look at how it works and how it affects mortgage affordability.

What is the mortgage stress test and how is it used?

When you get a mortgage, the lender wants to be confident you can make your payments. One of the calculations they use to do this is called your debt service ratio, which compares your housing costs and other debt payments to your income. Mortgage lenders usually want your gross debt service ratio (the cost of housing including your mortgage, property taxes, condo fees, and heat) to be no more than 39% and your total debt service ratio (the cost of housing plus all your other payments) to be no more than 44%.

What is the relationship between mortgage rates and the stress test?

As mentioned above, the qualifying rate you’ll be stress tested against is the higher of 5.25% or your contracted mortgage rate plus 2%. With today’s rates above 3.25%, nearly every borrower is tested at their contract rate plus 2%, rather than at the 5.25% floor. That makes the stress test move with the market.

For example, if you were to get a five-year fixed mortgage with today’s best rate of 4.34%, your lender would calculate your debt service ratios using a qualifying rate of 6.34%. Even the best five-year variable rate (currently 3.40%) would be tested at 5.40%, which is above the 5.25% floor.

Also read: Home affordability improved in August, but rising fixed rates could erase some gains

What do higher mortgage rates mean for your ability to afford a mortgage?

When you pay a higher mortgage rate, your monthly payment has to increase to cover the additional cost of borrowing. As a result, the maximum mortgage amount you’ll qualify for is reduced as rates rise.

Let’s say you have a household income of $100,000 per year. To stay within the maximum 39% gross debt service ratio, your total housing expense can be no more than $3,250 per month. Assuming your additional housing costs are $1,000 per month, that leaves you with $2,250 per month for your mortgage payment.

If you were qualified at today’s best mortgage rate of 4.34%, you could afford a purchase price of $463,000 with a down payment of $50,000.

However, because your minimum qualifying rate would be 6.34%, you would actually qualify for a purchase price of just about $391,000.

If mortgage rates were to rise by yet another 1%, your maximum affordability would fall to just $362,000 – a drop of $29,000.

Rate used to qualify	Maximum purchase price
4.34% (contract rate, no stress test)	$463,000
6.34% (stress test rate)	$391,000
7.34% (stress test rate if rates rise 1%)	$362,000

Is the stress test changing?

Not at the moment. The stress test floor has been 5.25% since 2021, and OSFI left the rule unchanged in its early-2026 update. With the lowest five-year fixed and variable rates currently around 3.4% to 4.3%, most borrowers are being tested at roughly 5.4% to 6.4%, though borrowers with higher rates are tested higher.

OSFI, the regulator that sets the mortgage stress testing rules, no longer follows a fixed annual announcement schedule. It maintains an internal review process and only announces a change if the MQR changes.

Update: Loan-to-income limits. OSFI also requires lenders to limit the volume of new uninsured mortgages they issue at more than 4.5 times a borrower’s income. The limit applies to each lender’s overall portfolio rather than to each individual loan, and it excludes insured mortgages. It has applied since each institution’s 2025 fiscal year start, and OSFI has since confirmed the limits will remain. In practice, it mainly affects uninsured borrowers taking on large loans relative to their income. OSFI has said LTI could eventually complement or replace the stress test, but it has not made that change.

Do I need to worry about the stress test if I already own a home?

The stress test is largely meant for new mortgages. If you already own a home and have a mortgage, you won’t be subjected to the stress test if you decide to renew with your current lender. If you want to refinance your mortgage, the stress test applies. If you switch lenders at renewal, you generally won’t be stress tested as long as your mortgage amount and amortization don’t increase (a “straight switch”), whether your mortgage is insured or uninsured. This exemption applies to switches between federally regulated lenders. Credit unions and other provincially regulated lenders set their own rules, so check with your lender.

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How can I maximize my mortgage affordability despite the stress test?

Raise your income: It’s easier said than done, but making more money can help you qualify for a bigger mortgage. Lenders also treat various types of income differently. Salaried income is the simplest to document, while commissions, bonuses and self-employment income are often averaged over two years or require extra paperwork, and lenders may count only part of them. If you have the option to move some variable pay into base salary, it can make your income easier for lenders to verify.
Save a bigger down payment: Making a larger down payment reduces the amount you need to borrow, and helps you save money on mortgage default insurance (often called CMHC insurance).
Get a mortgage pre-approval: If you’re planning to buy a home in the next three or four months, getting pre-approved for a mortgage can help you shop with confidence. When you apply for pre-approval, your mortgage broker or lender will look at your financial situation and guarantee a maximum purchase price and interest rate for up to 120 days. If rates go down before you complete your purchase, you’ll get the lower rate. If rates go up, you’ll still get the rate you were pre-approved for.
Start with a variable-rate mortgage and convert to a fixed rate: Traditionally, variable mortgage rates are lower than fixed-rate options, and that is the case today, with the lowest five-year variable rate starting at 3.40%, compared to 4.34% for a fixed rate. Because the stress test adds 2 percentage points to your contract rate, a lower variable rate also means a lower stress test rate. Some borrowers use this gap by taking out a variable-rate mortgage first to qualify at the lower rate, then converting to a fixed rate with the same lender after closing, without having to pass the higher fixed-rate stress test. Most lenders allow conversion without a penalty, but the fixed rate you’re offered at conversion may be higher than the best rates on the market, so confirm the terms with your lender first.

Use caution with this method, because your lender can raise mortgage rates at any time. Make sure you convert to a fixed-rate mortgage as soon as you can to avoid a situation where you’re potentially unable to afford your mortgage payments.

The bottom line

The mortgage stress test is a useful tool to make sure you won’t be caught off guard by higher interest rates. Prepare yourself by saving a larger down payment and improving your income, if only for mortgage application purposes. When you’re ready to buy a home, ask your mortgage broker about getting a mortgage pre-approval to lock in the best mortgage rate and gain certainty about how much you can afford.

Categories	Mortgages
Tags	mortgage rates mortgage stress test Mortgages Personal Finance