Rising interest rates to impact brokers’ searches - latest Knowledge Bank tracker results reveal

12 May 2022

The current rising interest rate environment looks set to impact mortgage availability and criteria searching Knowledge Bank’s latest criteria tracker results reveal.

The ‘maximum age of the borrower’ at the end of the mortgage term remains the most common search in the residential sector suggesting that borrowers are looking to extend mortgage payments over the longest possible term. The second most searched for criteria are for ‘income multiples that lenders use for affordability assessment’, and this looks set to become increasingly important as rates rise and affordability will come under the spotlight as the basis for responsible lending.

There was consistency in month-on-month criteria searches in the buy-to-let sector with ‘first-time landlords’ still keen to enter the market, making it the most-searched for the second month running. With rising house prices and a strong demand for rental properties this sector remains attractive to long term investors although rising product rates will squeeze margins and may adversely affect those landlords most heavily leveraged.

Criteria searches for second charge loans has seen the greatest change over the past month with three new searches making the top five. Brokers searching for lenders who would accept IVAs, both on-going and current became the second most popular search in the sector. This suggests that even in a low interest environment with robust house prices, borrowers are still getting into financial difficulty.

Searches in the bridging and commercial lending categories remained consistent with April’s results with searches for ‘regulated bridging’ and the ‘minimum loan amounts’ the top two searches in bridging. In the commercial sector, brokers searched for lenders prepared to lend on ‘semi-commercial properties’ and for those who allowed highest loan to value (LTV) as the top two searches.

Knowledge Bank believes that with the latest Bank Base Rate increase and the expectation that it will continue to rise borrowers are understandably moving towards fixed rate mortgages. However, intermediaries need to ensure that their clients still match lenders requirements well before the search for individual products begins.

“With criteria changing every single day it’s too easy to put the cart before the horse and start refining product rates without establishing whether your borrower will be accepted by the lender in the first place” said Matthew Corker, operations director at Knowledge Bank.

“In a rising interest rate environment, we should expect affordability to become even more prominent in lenders’ minds as that relates to the borrower not the product. It is crucial that brokers check criteria prior to a product search to avoid wasted time in the application process.”

Brokers wanting to find out more about Knowledge Bank can visit the web address: www.knowledgebank.uk

Criteria Activity Tracker

Top five searches performed by brokers on Knowledge Bank during March 2022