Beginning on Jan. 1, 2018, the Office of the Superintendent of Financial Institutions (OSFI)
required that those who borrow mortgages from the Canadian banks undergo stress tests
to ensure they can make their payments if interest rates rise.
This new stress test, known as B-20, means borrowers have to prove they can afford
their mortgage if rates rise by two percentage points, or to the five-year Bank of
Canada average rate — whichever one is higher.
The stress test has led to a loss of buying power. While under the old rules,
a borrower could get a mortgage at seven times their annual income,
under the new rules, that number has been reduced to about five times annual income.