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"Two interest rate cuts predicted for 2008"

By admin | January 3rd, 2008 | General

The base rate cut that took place in December came as welcome news for many homeowners across the UK who had been struggling to keep up with repayments on their mortgage. The base rate was cut by 0.25% for the first time in two year, after a series of five interest rate rises between August 2006 and July 2007. For many homeowners monthly repayments had become unmanageable, with repayments levels rocketing due to rising interest rates.

It is now being widely predicted that there will be a further two or three interest rate cuts over the coming year, and this was backed up by data from a recent Reuters poll involving 49 analysts and economists. The results of the poll indicated that economic growth is likely to slow down to 1.9% and should rise again in 2009 to 2.2%. High levels of consumer debt and problems with the housing market have been partly blamed for this expected fall in economic growth.

According to some financial experts worries about the economy are now overtaking worries about inflation, with one industry professional stating:  “We do not think that the potential for a firmer than expected inflation reading for Q4 as a whole will be sufficient to stand in the way of further policy easing in the coming months. After all the MPC is fundamentally forward-looking and it is its view of inflation in two years time that really matters for policy.”

Most experts are now predicting that the Bank of England will cut interest rates at least twice in the coming year, with many expecting two rises by the middle of the year. Some think that there may be more rises, and that rates could fall as low as 4% by the end of the year.

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