Minimum Qualifying Rate for Uninsured Mortgages: Why It Matters

by Sergey Korostensky

The Minimum Qualifying Rate (MQR) for uninsured mortgages is a stress test that helps lenders ensure borrowers can still afford their mortgage payments, even if their financial situation changes (like a job loss, higher living costs, or rising interest rates). This requirement, set by OSFI, helps reduce the risk of mortgage defaults and protects both borrowers and Canada’s financial system.

How the MQR is Set

We determine the MQR based on data from financial institutions, housing market conditions, and economic trends. We also consult with the Bank of Canada and the Department of Finance. The MQR is reviewed at least once a year.

The Buffer and the Floor

The MQR includes two components:

The Buffer: A 2% margin to help borrowers absorb financial setbacks.
The Floor: Set at 5.25%, it accounts for potential risks in the broader economy.

Stress Testing and Guideline B-20

Guideline B-20 sets out the rules for federally regulated lenders when offering uninsured mortgages, including applying the MQR to most new loans. However, it doesn’t apply to “straight switches” (when borrowers switch lenders without changing the loan amount or amortization period).

Loan-to-Income (LTI) Limit and MQR

The LTI limit is another tool to manage high levels of household debt and reduce lending risks. OSFI will continue to assess the role of the MQR after the LTI framework is in place.