Four Rate Cuts For 2008 As House Prices Fall Again

Experts are now suggesting that there could be as many as four interest rate cuts in 2008 as the Bank of England tries to steer the UK economy away from recession.

The first cut of the year could come as early as the second week in the New Year, following the cut in December which took the rate down to 5.55%.

If there were to be four cuts in 2008 the rate would come down to 4.5% which would be warmly welcomed by the UK’s homeowners who have struggled with rising mortgage rates on the back of interest rates that have gone up from 4.5% in August 2006 to 5.75% in July 2007.

Reports from the Centre for Economics and Business Research (CEBR), and BNP Paribas bank make these predictions, believing that poor economic growth (expected to be 1.6% in 2008) could force the bank into cuts.

The CEBR’s Richard Snook said: “So far only the housing and financial markets have weakened significantly as a result of the credit crunch. However, we expect the flow of negative economic data to become more pervasive – supporting further action by the Bank.”

Meanwhile, Hometrack’s latest house price figures show a fall for the third consecutive month, dropping 0.3% from November to December – the largest monthly fall since January 2005. This means that the annual house price inflation figure is down to 3%, with agencies reporting figures going down in three out of ten regions of the country.

Hometrack research director Richard Donnell said: “The greatest turnaround in market conditions has been seen in southern England where the market is slowing off a high base. Many would-be buyers have stepped back from the market and the greatest short term casualty has been lower levels of market activity with sales volumes down by 18% over the last 6 months.”