March 2009, when the BoE pushed the rate down from 1% to 0.50% in response to the financial crisis, was a long time ago. An entire cohort of the mortgage industry has grown up under the assumption that money is, effectively, almost free to borrow.

At the time of writing, the bank rate is 4% – shocking to some but a return to normalcy when looked at through a wider lens. Mortgage Finance Gazette caught up with some lenders to see how their underwriting departments have reacted to this.

“I actually think there has been acceptance among all staff that interest rates would have to rise from their ultra-low levels – it was just a matter of when,” says OSB Group head of underwriting Craig Richardson.

He continues: “The number of [base rate] increases in a very short period of time caused a stir, but we kept our teams updated and communicated contributing factors so everyone understood why the rapid rises were happening.”

And a Yorkshire Building Society spokesperson reminds us that, unlike borrowers, who may check rates only every few years, underwriters see rate changes incrementally.

“This means that they are less likely to be surprised by a higher rate environment. We also spend time educating and discussing mortgage markets with our colleagues across the business to help them understand why rates are moving.

“However,” the spokesperson adds, “it’s true that underwriters have become accustomed to rates being historically low.”

They also say rate changes have left the underwriting process itself unchanged because of lenders’ affordability models being automated.

However, Spring Finance director of bridging Claire Newman says that, for her team, “There is now definitely more scrutiny on the exit route for a bridging loan.

She explains: “When rates were low an exit had to be assessed, but provided everything stacked up then you could be fairly comfortable that a refinance exit would be achievable.

“Now that rates are rising the underwriters, and in turn the brokers, need to dig a bit deeper to prove to a lender that a refinance is achievable and that the monthly payments have been stressed to cope with any further rate rises.”

Richardson says the current interest rate environment necessitates greater communication and education between underwriters and brokers. “We have a wide range of experience across our underwriting teams, many of whom have worked in a rising interest rate environment before,” he says.

“This has been helpful in communicating and explaining the changes to the wider department. We’ve also strengthened our direct communications with brokers, including regular outbound calls to offer case updates and to discuss any queries.

“[This] enables us to keep cases running smoothly, offer timely updates and also helps to manage expectations on both sides. It also means we can keep a step ahead and help to foresee any potential issues/challenges and resolve them before they impact the case timeline,” he explains.

On the subject of keeping underwriters up-to-date, the YBS spokesperson explains that, “we have a standardised programme for each new underwriter to learn our systems and policies and attain competence.

“Once they have completed this, the scheme outlines a minimum number of checks per quarter to review their competence. There is also a separate process to demonstrate competence in new mandates (for example higher value loans, or different lending types such as interest only).”

They add: “We also have weekly sessions to go through changes to policy or process, and ad hoc masterclasses to discuss topical aspects of underwriting, and provide specialist guidance.”

On asked if there has been any guidance from the regulator over rising rates, the spokesperson says that there is no industry-aligned, specific training for underwriters, with this varying from lender to lender.

Newman, though, says plans are afoot for a bridging-focused qualification, “which will have contribution from brokers and lenders.

“But, she says, “we are yet to see the exact detail of what is included in the modules.

“Previous general finance sector qualifications have been more geared towards brokers as opposed to lenders and with each lender having specific risk appetites, funding lines and processes I think there would also be company specific training required even if there was an industry wide framework in place.”

In such a challenging environment, it would be remiss to not ask for advice on behalf of anybody reading this who be seeking some.

“The best advice for underwriters in any environment is to get to know your customer,” says YBS’ spokesperson.

“This will help you to make a common-sense decision.

They continue: “It’s also really important to build the application into a story – which will help you to create a picture of the applicants and their situation.

“This will make it easier to understand whether any risks you identify can be mitigated, and help you to achieve the best possible outcome for the customer.”