The stress test on a variable-rate mortgage
Variable-rate mortgages use the same stress test as fixed: the greater of your variable rate + 2 points or 5.25%. At the Bank of Canada's August 2026 averages for new variable mortgages (3.74% insured, 3.90% uninsured), that's 5.74% and 5.90%, below 6.12% and 6.58% for 5-year fixed. The floor only takes over below 3.25%.
Is the stress test different for variable rates?
No. Since June 1, 2021 every new mortgage, fixed or variable, insured or uninsured, qualifies at the greater of the contract rate + 2 points or 5.25%. For a variable mortgage, the contract rate is the variable rate you're offered on the day you're approved, not a five-year fixed rate and not the Bank of Canada's posted rate.
It wasn't always this way. From 2010, insured borrowers who chose a variable rate had to meet the standards for a five-year fixed mortgage instead, and from October 2016 to May 2021 the Bank of Canada's posted 5-year rate set a floor that sat above the average insured variable rate in 55 of 55 months. Today's rule tests variable borrowers on their own rate, so a lower variable rate means a lower qualifying rate, down to the floor. The section on how variable borrowers were tested before 2021 puts numbers on the change.
The qualifying-rate formula for uninsured mortgages: Source: OSFI, Minimum qualifying rate for uninsured mortgages, effective January 29, 2026. Checked .The same buffer and floor for insured mortgages, in federal regulation: Source: Justice Laws, Insurable Housing Loan Regulations (SOR/2012-282), ss. 5, 6 and 6(3.1), effective February 27, 2025. Checked .The terms this page uses
- Variable rate
- A mortgage rate that moves during the term when the lender's prime rate moves.
- Adjustable-payment variable
- A variable mortgage whose payment changes with the rate, so a rise shows up in your next payment.
- Fixed-payment variable
- A variable mortgage whose payment stays the same; a rise changes how much of it goes to interest instead.
- Trigger rate
- On a fixed-payment variable mortgage, the rate at which the payment no longer covers the interest. Your contract says what happens then.
- Qualifying rate
- The rate the lender tests you at: the greater of your contract rate + 2 points or 5.25%.
What's the qualifying rate on a variable mortgage today?
At the Bank of Canada's August 2026 averages, new variable mortgages qualify 0.38 points lower than 5-year fixed ones when insured, and 0.68 points lower when uninsured:
| Mortgage | Average contract rate | Qualifying rate | Set by |
|---|---|---|---|
| Insured variable | 3.74% | 5.74% | Rate + 2 points |
| Uninsured variable | 3.90% | 5.90% | Rate + 2 points |
| Insured 5-year fixed | 4.12% | 6.12% | Rate + 2 points |
| Uninsured 5-year fixed | 4.58% | 6.58% | Rate + 2 points |
Averages are effective rates on new mortgages across Canadian lenders, not any one lender's offer. Your own rate decides your qualifying rate.
Those averages predate the Bank of Canada's October 29, 2026 decision, which raised its policy rate from 2.25% to 2.50%. Variable mortgage rates move with each lender's prime rate, so check the rate you're actually offered, not the average. Each move in your offered variable rate moves your qualifying rate by the same amount, as long as you stay above 3.25%.
Can a variable rate get you approved for a price fixed can't?
Sometimes, by a narrow margin. Here is this page's household at a price that sits between its fixed and variable limits.
A first-time buyer couple earning $138,000 between them, with $72,000 saved and $560 a month of car and card payments, comparing the Bank of Canada's August 2026 average insured variable rate (3.74%) with the average insured 5-year fixed (4.12%), both over 25 years.
| Household income | $138,000 |
|---|---|
| Down payment | $72,00010.6% of the price, so the loan is insured |
| Price | $680,000 |
| Other debts | $560 a month |
| Property tax, heating | 0.8% of price a year, $100 a monthOur planning estimates |
| Mortgage incl. insurance premium | $626,848Premium $18,848, added to the loan |
| Qualifying rate: variable vs fixed | 5.74% vs 6.12%Each contract rate + 2 points |
| Payment the lender tests | $3,914 vs $4,055Monthly, at the qualifying rate |
| GDS: variable vs fixed | 38.8% vs 40.1%Limit 39% |
| TDS: variable vs fixed | 43.7% vs 44.9%Limit 44% |
| Verdict | Passes on the variable rate; fails on the fixed rateMost it passes at: $682,400 variable, $663,100 fixed |
The only thing that changes between the two columns is the rate, and the 0.38-point gap in qualifying rates is worth $19,300 of purchase price to this household. At $680,000 that's the difference between a pass and a fail on GDS. You can open the fixed-rate case to see the fail.
The real payment on the variable rate would be $3,210 a month. The lender approved it on $3,914, the payment if the variable rate were 2 points higher. If the rate actually climbs that far early in the term, the payment it was tested on becomes, roughly, the payment it makes.
Open the variable-rate case in the calculator →Computed November 1, 2026.
How much more can a variable rate let you borrow?
At today's averages, a little, because the variable qualifying rate is lower. Here is the same household with an insured down payment and with $180,000 down (uninsured, so it uses the uninsured averages):
| 5-year fixed | Variable | Difference | |
|---|---|---|---|
| Insured, $72,000 down | $663,100 (tested at 6.12%) | $682,400 (tested at 5.74%) | $19,300 |
| Uninsured, $180,000 down | $755,300 (tested at 6.58%) | $788,800 (tested at 5.90%) | $33,500 |
$138,000 income, $560 a month of other debts, 25-year amortization, property tax 0.8% of price a year (our estimate), heating $100 a month, GDS/TDS 39% / 44%, insurance premium added to the insured loan. Computed by our engine.
The uninsured gap is bigger because the uninsured averages are further apart (4.58% fixed vs 3.90% variable) than the insured ones (4.12% vs 3.74%). That room comes with a catch. You qualify on today's variable rate, but you carry the risk that it rises. Choosing variable to squeeze into a price is a bet on rates, not a way around the test. Compare your own fixed and variable offers in the qualifying rate calculator.
When does the 5.25% floor kick in?
Only when your rate is below 3.25%. Above that, the 2-point buffer sets your qualifying rate. Below it, the floor does, and a lower variable rate stops adding buying power:
| Variable contract rate | Qualifying rate | Set by | Rise you're tested for | Highest price that passes |
|---|---|---|---|---|
| 2.75% | 5.25% | Floor | 2.50 points | $708,800 |
| 3.00% | 5.25% | Floor | 2.25 points | $708,800 |
| 3.25% | 5.25% | Buffer | 2.00 points | $708,800 |
| 3.50% | 5.50% | Buffer | 2.00 points | $695,100 |
| 3.74% | 5.74% | Buffer | 2.00 points | $682,400 |
| 4.00% | 6.00% | Buffer | 2.00 points | $669,100 |
Same assumptions as the table above. Computed by our engine.
When the floor binds, you're tested for a bigger rise than the usual 2 points. At 2.75% you're tested at 5.25%, 2.50 points higher, and the household's limit stays at $708,800 however low the rate goes. All of today's averages are above 3.25%, so the buffer, not the floor, is what sets the rate for a typical variable borrower right now.
How were variable borrowers tested before 2021?
Harder, for most of the last fifteen years. The rules below are the federal ones in force at each date; the last two columns apply each rule to today's variable averages and to this page's household, as a what-if.
| In force | Loans covered | Rule for a variable rate | Today's average would be tested at | Most this household could buy |
|---|---|---|---|---|
| April 19, 2010 to October 16, 2016 | Insured | Meet the standards for a five-year fixed-rate mortgage | Not a published formula | — |
| October 17, 2016 to May 31, 2021 | Insured | Greater of the contract rate or the Bank of Canada's posted 5-year rate | 6.19% | $659,600 |
| January 1, 2018 to May 31, 2021 | Uninsured, federally regulated lenders | Greater of the contract rate + 2 points or the posted 5-year rate | 6.19% | $774,100 |
| Since June 1, 2021 | Both | Greater of the contract rate + 2 points or 5.25% | 5.74% insured, 5.90% uninsured | $682,400 insured, $788,800 uninsured |
What-if using the posted 5-year rate of 6.19% (week of October 28, 2026) and the August 2026 variable averages. Insured household: $72,000 down; uninsured: $180,000 down. Low-ratio insured loans moved to the 2016 rule on November 30, 2016.
The posted rate is a list price that the big banks set above what borrowers pay. From November 2016 to May 2021 it ran 1.02 points to 3.22 points above the average insured variable rate, so a typical insured variable borrower was tested at the posted rate, whatever their own rate. Applied to today's numbers, that would test the 3.74% insured variable average at 6.19% instead of 5.74% and cut this household's limit by $22,800. The 2021 change linked the test to your own rate, which is why the gap between fixed and variable qualifying rates now simply mirrors the gap between the rates themselves.
Is it the same at a credit union?
For insured mortgages, yes: the federal rule applies at every lender. For uninsured mortgages, credit unions follow their province. Saskatchewan and Quebec prescribe the same formula as OSFI, so a variable rate is tested at rate + 2 points or 5.25% there too. BC, Ontario, Manitoba and Nova Scotia leave the buffer to each credit union.
Alberta is the exception worth knowing. The last credit-union guidance we found, from 2018, uses the contract rate + 2 points or the Bank of Canada's 5-year posted rate, whichever is higher. That posted rate was 6.19% on October 28, 2026. If that guidance still applied, the 3.90% uninsured variable average would be tested at 6.19%, not 5.90%, and this household with $180,000 down would top out at $774,100 instead of $788,800. A 5-year fixed at 4.58% would be tested at 6.58%, so the gap between the fixed and variable qualifying rates would shrink from 0.68 to 0.39 points. We couldn't confirm the guidance is still current, so ask the credit union which rate it uses. The province-by-province table has every regulator's text.
Alberta credit unions (guidance G#03-2018, currency unconfirmed): Source: Credit Union Deposit Guarantee Corporation (Alberta), Residential mortgage underwriting guidance G#03-2018, effective March 1, 2018. Checked .What does the test cover if variable rates rise?
The stress test checks that you could carry the payment at the qualifying rate. It doesn't check anything beyond it. Here is what happens to the example household's $680,000 purchase if the variable rate rises early in the term:
| Variable rate | Rise | Monthly payment | GDS at that rate | TDS at that rate | Within 39% / 44%? |
|---|---|---|---|---|---|
| 3.74% | Today's average | $3,210 | 32.7% | 37.6% | Yes |
| 4.24% | +0.50 points | $3,379 | 34.2% | 39.1% | Yes |
| 4.74% | +1.00 points | $3,554 | 35.7% | 40.6% | Yes |
| 5.24% | +1.50 points | $3,732 | 37.3% | 42.1% | Yes |
| 5.74% | +2.00 points | $3,914 | 38.8% | 43.7% | Yes |
| 6.24% | +2.50 points | $4,100 | 40.5% | 45.3% | No |
Payment on the full loan over 25 years at each rate, as if the rise came at the start of the term; later in the term the balance is lower. Computed by our engine the same way as the calculator.
The table is the stress test seen from the other side. The household's real ratios stay inside the limits until the rate has risen about 2 points, and they cross them at 6.24%. That's what passing means: you could absorb a rise up to your qualifying rate and still be within the ratios a lender would accept. Past that, the approval says nothing.
How a rate rise reaches you depends on the product:
- Adjustable-payment variable. Your payment changes when the rate changes, so you feel a rise straight away, as in the table.
- Fixed-payment variable. Your payment stays the same and more of it goes to interest. If rates climb far enough, the payment no longer covers the interest. That point is the trigger rate, and your contract says what happens next.
Either way, the test happens once, when you're approved. A rate change during the term doesn't retest you, and renewing with your own lender isn't retested either.
OSFI: lenders aren't expected to re-apply the qualifying rate to borrowers renewing with them. Source: OSFI, Final revised Guideline B-20 (letter of October 17, 2017), effective October 17, 2017. Checked .What do people get wrong about variable rates and the test?
- "Variable mortgages are tested at the five-year fixed rate." That was the insured rule from 2010, and the posted-rate floor did much the same from 2016 to 2021. Since June 1, 2021 you're tested at your own variable rate + 2 points.
- "Variable gets a softer test." The formula is identical. The qualifying rate is lower only because the contract rate is lower.
- "A lower variable rate always means I can borrow more." Not below 3.25%. From there down, the 5.25% floor sets the test and the household above stays at $708,800.
- "If rates rise, the lender will retest me." Not during the term and not at renewal with the same lender. The risk after approval is yours to plan for.
- "20% down at a credit union means no test." Saskatchewan and Quebec prescribe the same formula, Alberta's last guidance used the posted rate, and BC's and Ontario's regulators expect credit unions to build in buffers or stress tests of their own.
What this means for you
- If you're choosing between fixed and variable to reach a price: put both offers into the qualifying rate calculator, then check the price on the stress test calculator. If variable is the only way it passes, plan as if you'll pay the qualifying rate, because that's the rise the approval assumes you can absorb.
- If your variable offer is below 3.25%: you'll be tested at 5.25%. A lower rate still cuts your real payment, but it won't raise your limit; negotiate for the payment, not the approval.
- If you're putting 20% or more down at a credit union: ask which rate it qualifies variable loans at. In Alberta it may still be the posted rate, which tests a variable rate harder than a bank would.
- If you already have a variable mortgage and rates rise: you won't be retested, but nothing protects your budget either. Work out your trigger rate from your contract, and check your options at renewal with the renewal and switch checker.
- If you're not sure the variable rate you've been offered is competitive: compare it on Is This a Good Rate? before you lock in a price around it.
Frequently asked questions
What is the stress test rate for a variable mortgage?
The greater of your variable rate + 2 points or 5.25%. At the August 2026 insured variable average of 3.74%, that's 5.74%.
Do you qualify for more with a variable rate?
Usually a little, when the variable rate is lower than the fixed rate, because the qualifying rate is lower too. For our example household ($138,000 income) the difference is $19,300 of purchase price with $72,000 down and $33,500 with $180,000 down.
Is a variable mortgage tested at the 5-year fixed rate?
Not any more. Insured variable borrowers were held to five-year fixed standards from 2010, and the posted 5-year rate was the floor from 2016 to 2021. Since June 1, 2021, variable and fixed mortgages both qualify at their own contract rate + 2 points, or 5.25% if that's higher.
Are you stress tested again when a variable rate goes up?
No. The test applies when you take out the mortgage. A rate change during the term doesn't retest you, and renewing with the same lender isn't retested either.
Primary sources
- OSFI — Minimum qualifying rate for uninsured mortgages (effective January 29, 2026). Checked .
- Justice Laws — Insurable Housing Loan Regulations (SOR/2012-282), ss. 5, 6 and 6(3.1) (effective February 27, 2025). Checked .
- OSFI — Amendments to the minimum qualifying rate for uninsured mortgages (effective June 1, 2021). Checked .
- Department of Finance Canada — Statement: new minimum qualifying rate for insured mortgages (May 2021) (effective June 1, 2021). Checked .
- Government of Canada — Government of Canada takes action to strengthen housing financing (2010) (effective April 19, 2010). Checked .
- Department of Finance Canada — Technical backgrounder: mortgage insurance rules (October 2016) (effective October 17, 2016). Checked .
- OSFI — Final revised Guideline B-20 (letter of October 17, 2017) (effective October 17, 2017). Checked .
- Bank of Canada — Banking and financial statistics: effective rates on new mortgages. Checked .
- Bank of Canada — Posted interest rates offered by chartered banks (5-year conventional mortgage). Checked .
- Credit Union Deposit Guarantee Corporation (Alberta) — Residential mortgage underwriting guidance G#03-2018 (effective March 1, 2018). Checked .
- Credit Union Deposit Guarantee Corporation (Saskatchewan) — Guideline 2015-01: Residential mortgage underwriting (Appendix I) (effective June 1, 2021). Checked .
- Autorité des marchés financiers (Québec) — Residential hypothecary lending guideline (revised September 2026) (effective September 1, 2026). Checked .