Interest rates 'will fall to 0%' - commercial mortgages

29 January 2009

Interest rates are on their way to reaching as low as zero per cent, it has been claimed.

Such a reduction could lower the cost of commercial mortgages and aid borrowers in making repayments.

Charles Davis, a senior economist at the centre for economics and business research, said that the base rate may drop to zero or 0.25 per cent and stay there "for a very long period of time".

"The real reason for that is that we have got a full-on recession, which could lead to deflationary pressures in the system," he explained.

Mr Davis stated that deflation is a "real, major risk" for the UK and that the country should look to avoid it "at all costs".

The Bank of England's monetary policy committee reduced the base rate by 0.5 per cent on January 8th, taking it to 1.5 per cent.
Previously, it had been lowered to two per cent on December 4th.