Three interest rate cuts in 2008

Posted: 20 Dec 2007 11:06:50 GMT

Homeowners may find themselves in a far better financial position in 12 months' time.

Homeowners may find themselves in a far better financial position in 12 months' time.

That is according to Howard Archer from Global Insight, who believes that the base rate of interest will be as low as 4.75 per cent this time next year.

It comes after the minutes from the Bank of England's Monetary Policy Committee (MPC) December meeting were published.

The minutes revealed that the MPC voted 9-0 in favour of cutting interest rates to 5.5 per cent in the month - the first downward movement for over two years.

Commenting on the report, Mr Archer said that the first rate cut is likely to be announced early in 2008.

"Another interest rate cut in January is possible if the data and survey evidence is very weak," he commented.

"However, given recent rising inflation expectations, we suspect the MPC may prefer to wait until February to make sure that pay moderation is continuing in the early 2008 wage rounds.

"We expect interest rates to be cut by a further 25 basis points in both February (to 5.25 per cent) and May (to five per cent). Furthermore, we expect interest rates to be trimmed further to 4.75 per cent in the second half of 2008," concluded the economist.

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