Interest rate may fall to 4 per cent by 2008 end
The base rate of interest may fall to as low as 4 per cent by the end of the next year.
London (Loans-park) December 24, 2007: The Bank of England’s policy amid the fragile state of the UK economy, slowdown in consumer spending and a flagging housing market indicates that the base rate of interest could drop to as low as 4 per cent next year. Financial experts are predicting that the Bank's Monetary Policy Committee could cut the interest rate early in 2008 and the year may end with the 4 per cent mark.
The forecast came in wake of the release of the minutes from the Bank’s meeting.
All the members of the bank’s monetary policy committee unanimously voted in favour of cutting the interest rate to 5.5 per cent. Another cut in the interest rate would bring great relief to millions of homeowners who are still struggling with high mortgage costs.
Vicky Redwood, an economist at Capital Economics, said: “We continue to expect rates to fall more sharply than the markets currently expect, to perhaps as low as 4 per cent.”
The housing market has seen more than 82 per cent increase in prices over the last five years. The Royal Institution of Chartered Surveyors (RICS) predicted that increase in house prices might end next year, ending 12 years of unbroken growth. If inflation is taken into account, it can be said that house prices would actually fall.
Simon Rubinsohn, the RICS's chief economist, said: “2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform. The effect of the credit crunch will dissipate slowly, meaning that those seeking to obtain finance in the first half of 2008 may struggle.”
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