The high interest rate environment looks set to impact mortgage availability and criteria searches, according to Knowledge Bank.

The criteria tracker found that the ‘maximum age of the borrower’ 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 over the longest possible term”.

The second most searched for criteria is for ‘income multiples that lenders use for affordability assessment’, which “looks set to become increasingly important as rates rise and affordability will come under the spotlight as the basis for responsible lending”.

Interest rates hit 7% last month, a 30-year high. The Bank of England has warned that inflation will top 10% by the end of the year, something not seen since 1982.

Criteria searches for second charge loans saw the greatest change over the past month with three new searches making the top five. Brokers searching for lenders who would accept individual voluntary arrangements both ongoing and current became the second most popular search in the sector.

The report says: “This suggests that even in a low-interest environment with robust house prices, borrowers are still getting into financial difficulty.”

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.

The study adds: “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.”

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 the highest loan-to-value as the top two searches.

The criteria tracking firm says that the latest bank base rate increase and the expectation that it will continue to rise means that borrowers are understandably moving towards fixed-rate mortgages. But the business adds that brokers should make sure their clients still match the lender’s requirements before searching for individual products.

Knowledge Bank operations director Matthew Corker says: “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.”

“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.”