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Dev Malle: Advisers should prepare for a rate rise

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There is a danger Bank of England governor Mark Carney will be accused of being the boy who cried wolf considering he first sounded the alarm on a rate rise two years ago.

However, this time around, he has been sensible to signpost a move early, as it gives borrowers time to prepare.

Any rate rises will be slow and steady, and will be in advance of the economic need to increase them. This will allow the 2 per cent inflation target to be planned for rather than reacted to. Commentators remain split on when it will happen, with estimations ranging from Q4 this year to Q1 2017.

Needless to say, this is another opportunity for brokers to engage with clients. The initial increase is likely to be 25 basis points.

However, if the borrower is sitting on a standard variable rate most lenders will be looking to make adjustments to margins they have been starved of for eight years.

So, a 0.5 per cent increase in rates would equate to a monthly payment increase of around £42 per month for a £100,000 mortgage.

This should be the starting point for budget planning with clients, so they can find the additional savings now. It is also an opportunity to ensure critical insurance plans are not seen as the easy options to cut back on.

The loyalty to be gained from forward planning for any rate shock could be considerable. Dare I say some clients may even expect it from their adviser.

Dev Malle is group sales director at myhomemove

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