Under the B-20 stress test guidelines, at what rate must borrowers qualify for uninsured mortgages?
Correct Answer
D) The greater of contract rate plus 2% or 5.25%
OSFI's B-20 guidelines require borrowers to qualify at the greater of their contract rate plus 2% or 5.25% (the minimum qualifying rate). This stress test ensures borrowers can handle potential interest rate increases and economic stress.
Why This Is the Correct Answer
Option D is correct because OSFI's B-20 guidelines specifically mandate that borrowers seeking uninsured mortgages must qualify at the greater of two rates: their contract rate plus 2% or 5.25%. This dual-threshold approach ensures adequate stress testing regardless of market conditions. The 'greater of' provision means that in low-rate environments, the 5.25% minimum applies, while in higher-rate periods, the contract rate plus 2% becomes the qualifying standard. This regulation is designed to protect the financial system from overleveraging and ensure borrowers can handle potential rate increases during their mortgage term.
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