What is the primary purpose of the B-20 stress test for uninsured mortgages?
Correct Answer
B) To ensure borrowers can afford payments at higher rates
The stress test makes borrowers qualify at a rate higher than their contract rate so they can keep making payments if they face shocks such as higher interest rates, lower income or higher expenses. OSFI sets the minimum qualifying rate as the greater of the contract rate plus 2% or 5.25%, and expects federally regulated lenders to apply it through Guideline B-20. The 5.25% floor is set by OSFI, not the Bank of Canada.
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