Rising interest rates mean lenders are now lending less money than a year ago on the same salary.

What matters most to lenders now is the amount of after tax income borrowers have and not the gross salary. Up to a year ago many lenders were, publicly at least, still basing their lending decision on a borrower's gross salary.

The old yardstick that a borrower could hope to get two and half times his income, plus the second income, is no longer in much use. But now the most common is a percentage of net salary, usually set at 40 per cent, according to Sarah Wellband, associate director at mortgage advisers Rea Mortgage Services.

For example, if a couple had £2,000 per month after tax between them, most lenders would be prepared to lend whatever amount would lead to a monthly repayment of £800. A year ago on a variable interest rate of 4.5 per cent over 20 years, that would have meant a mortgage of £125,000. But after recent interest rate increases the same couple would only be able to raise a mortgage of £115,000. With further interest rate rises likely in September and later in the year that is set to go on falling.

Of course, this also throws up the limits of the new system. It could mean that the couple who were paying over 40 per cent of their income last year are paying over more than that now and, conceivably, this could end up as high as 50 per cent if interest rates continue to rise.

According to Ms Wellband this is unlikely. She says that tax cuts and wage rises should cover the difference but this is not the most cautious way of planning. She also points out that once people have a mortgage they usually prove able to budget.

She also points out that the new way of working out how much to lend also allows a lender to consider how much a borrower is paying out on other loans, such as credit cards or car loans, and allows the amount spent on children to be considered. Generally, lenders calculate that children cost about £125 monthly, whereas of course many couples spend almost that much a week on a creche in the Dublin area.

It is still the case that public service workers generally have no problem getting a loan. Salary scales which mean wage increases as a matter of course and the permanence of the jobs ensure that. Professionals, such as doctors or engineers, also have few problems as they can generally rely on moving fairly quickly up a salary scale.

Tradesmen are also now falling into that category and, according to Ms Wellband, a carpenter, say, who has just set up himself can often get a loan based on his salary at a previous job. The same is true of other tradesmen. Taxi drivers are also able to get loans very quickly, she says.

However, others who set up service sector or IT firms, for example, experience a great deal more trouble. Two years accounts are required, along with future projections. Even with that, many find they need to approach the bank which they have the business relationship with.

Others who can encounter difficulties are people who rely on a lot of overtime or undeclared earnings. But, according to Ms Wellband, if an employer is willing to commit to writing the amount of overtime expected, or earnings after official time, lenders will take this into account. Likewise, if someone shows that a certain amount of money is paid into their account each week, this will also be taken into account, she says.

Borrowers should also remember that nearly all lenders are willing to take rental income into account. Most are willing to take between 50 per cent and 80 per cent of the value into the repayment calculations. So if you can rent a room in your home for £60 a week, that could be worth an additional £160 a month on your net salary.