Base rate 'to be lowered before Christmas' - commercial mortgages

08 August 2008

Those hoping to see the Bank of England's base rate fall can expect an early Christmas present, an economist has predicted.

Royal London Asset Management economist Ian Kernohan said yesterday's decision by the Bank of England's monetary policy committee (MPC) to hold the base rate at five per cent for the fourth successive month is part of a strategy of allowing economic growth to be curbed so that inflation will subside.

This will then allow it scope to reduce the rate "by Christmas".

Such a reduction could help lower the cost of commercial mortgages.

Scottish Widows Investment Partnership's comment on the MPC decision was that a cut now would be "difficult to justify" because of rising inflation.

However, it stated, this will start to fade from September, making possible four cuts in the spring and summer of 2009.

The base rate will then stay at four per cent into 2010, it predicted.