Some brokers want to see it reduced or scrapped. Others say it's served an important purpose
It’s a prominent bone of contention among many Canadian mortgage brokers and homebuyers: the stress test requiring borrowers to show they could afford higher mortgage payments than their contract rate, a rule some believe freezes out buyers and pummels purchasing power.
But while plenty of brokers believe the government should revisit that qualifying requirement – or do away with it entirely – there are no easy answers to the question of what to do with the mortgage stress test.
That’s because the rule, which says borrowers must be able to afford a rate of either 5.25% or two points above their contract rate – whichever is higher – has proven a hugely effective means of helping homeowners absorb the impact of a recent spike in rates, RATESDOTCA mortgage and real estate expert Victor Tran (pictured top) told Canadian Mortgage Professional.
Rates shot up in 2022 and 2023 after hitting rock-bottom lows during the COVID-19 pandemic, with that jump sparking fears of a so-called mortgage “renewal cliff”: borrowers facing significant strain with higher payments when renewing in 2025 and 2026.
A renewal crisis has yet to emerge, and Tran said the stress test has proven an important part in helping prevent that – even if scrapping the rule could mean more business for brokers in the current market.
“From the [broker] level, it’s in everyone’s best interest to reduce the stress test or eliminate it. That just means a lot more people can qualify easier for mortgage brokers and specialists to work deals as well,” he said. “But there’s a reason why it’s there.
“It’s there by design, and it did a job for the longest time. We saw some of the lowest rates during COVID in 2020 and 2021, and we had that stress test rate as well. Now a lot of those customers or clients are coming up for renewal but luckily, they were stress tested five years ago to ensure they can handle the higher payments now.”
Delinquencies rising, but stress test may have helped prevent bigger shock
While there’s been no sign yet of a market meltdown from renewal pain, a new report from Equifax put the spotlight on rising mortgage stress – particularly in Ontario, where the mortgage delinquency rate has spiked by 71.5% in the first quarter of 2025 compared with the same time last year.
Canada's biggest banks are boosting rainy-day funds, with significant loan-loss provisions in Q2. Carl De Souza, Senior Vice President at Morningstar DBRS, explains banks are "tightening their lending box" amidst market uncertainty.https://t.co/xuZQ0BOiYD
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 2, 2025
Delinquencies were at historic lows, and the current rate (0.24%) in Ontario is still small. But Tran said the presence of the stress test has been a key factor in ensuring that increase has been (for now) contained.
“It’s not a whole lot in the grand scheme of things if we look at how many total mortgages there are in Ontario, but it’s still a big concern,” he said, “and I think that number could actually be a lot higher if it wasn’t for a stress test. It did its job, in other words. It’s there for a reason.”
Brokers call for reduction in minimum qualifying rate
Some brokers believe it’s time for the stress test, which is regulated by the Office of the Superintendent of Financial Institutions (OSFI) for uninsured mortgages and the federal government for their insured counterparts, to be reconsidered and potentially reduced.
Alex Lavender, a Nova Scotia-based broker with Centum Home Lenders, believes eyewatering home prices coupled with the stress test are making affordability a nightmare for buyers in the current market.
He said there were grounds for trimming the requirement to one percentage point above the contract rate, particularly in regional markets less prone to extreme fluctuations like Ontario and British Columbia.
“Two percent, especially when things were really on the high side, was a bit aggressive,” he told CMP. “And now we’re coming down to probably a more stable market. I think 1% is just going to give buyers that little bit of extra buying power that they need.”
Taz Zaide, a Toronto broker with 6ix Mortgage Group, also called for more flexibility in stress test rules. “It’ll open a lot of opportunities for both realtors and mortgage brokers to re-engage those prospective clients,” he said, “and obviously that’ll have an impact on the market as well.”
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