High interest rates dominate broker searches: Knowledge Bank

According to Knowledge Bank, the high interest rate environment is expected to impact mortgage availability and search criteria.

The criteria tracker found that “maximum borrower age” at the end of the mortgage term remains the most common search in the residential sector in April, “suggesting that borrowers are looking to extend mortgage payments for the longest possible time”.

The second most sought-after criterion is “income multiples that lenders use to assess affordability”, which “seems to become increasingly important as rates rise and affordability comes under the spotlight as the basis for responsible lending”.

The Bank of England The Monetary Policy Committee has raised its key rate four times since December to 1%.

Inflation hit 7% last month, a 30-year high. The Bank warned that inflation would hit 10% by the end of the year, not seen since 1982.

Criteria searches for second charge loans have seen the biggest change in the past month with three new searches among the top five. Brokers looking for lenders who would accept ongoing and individual voluntary arrangements have become the second most popular search in the industry.

The report says: “This suggests that even in a low interest rate environment with robust house prices, borrowers are still struggling financially.”

There was consistency in month-to-month criteria searches in the buy-to-let industry, with ‘first time owners’ always keen to enter the market, making them the most sought after for the second consecutive month.

The study adds: “With rising property prices and strong demand for rental properties, this sector remains attractive to long-term investors, although rising commodity rates are compressing margins and may negatively affect most indebted owners”.

Searches in the bridging and commercial lending categories remained consistent with the April results, with searches for “regulated bridging” and “minimum loan amounts” being the top two bridging searches. In the commercial sector, brokers looked for lenders willing to lend on “semi-commercial properties” and those who allowed the highest loan-to-value ratio as the top two searches.

The criteria-tracking firm says the latest increase in the bank’s prime rate and the expectation that it will continue to rise means borrowers are naturally gravitating towards fixed-rate mortgages. But the company adds that brokers should ensure their clients still match the lender’s requirements before researching individual products.

Knowledge Bank COO Matthew Corker says: “With criteria changing every day, it’s all too easy to put the cart before the horse and start honing product rates without determining whether your borrower will be accepted. by the lender in the first place.”

“In a rising interest rate environment, we should expect affordability to become even more important in the minds of lenders, as it is about the borrower and not the product. It is crucial that brokers check the criteria before a product search to avoid wasting time in the application process. »

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