Three interest rate cuts predicted for 2008
November 24, 2007 by admin
Filed under News, News-Mortgages
According to city economists homeowners in the UK will be able to enjoy easier financial management next year with predictions that interest rates will fall two or three times over the course of the year.
Since August 2006 interest rates have risen five times, each time by 0.25%, and this took the base rate from 4.5% to 5.75% in under a year. Since July of this year interest rates have remained stable at 5.75%, despite calls from some agencies for the Bank of England to cut rates.
Economists are now predicting that interest rates could fall back to 5% next year through a series of interest rate cuts. Some economists predict that there may be one interest rate cut by the end of this year and a further one early or mid next year. However, the timing of interest rate cuts will be dependant upon data reflecting continued economic slowdown. GDP growth forecasts have been downgraded for next year, and this is because of factors such as the series of interest rate rises, volatile financial markets, and the current strength of the pound.
One economist stated: ‘Crucially the Bank has validated market expectations that we are going to see two or three interest cuts in 2008.’
Another said: ‘The report is markedly more doveish and indicates that at least two interest rate cuts are likely.’
Any interest rate cuts are likely to be welcomes by homeowners, who have seen their repayment rocket over the past year, with interest rate rises adding hundreds of pounds to the mortgage repayments of some homeowners. There is also set to be financial turmoil for those due to come of cheap fixed rate mortgages deals over the coming months, and an interest rate cut could help to ease the financial impact.
Alan Wright
24th November 2007
