Interest rates 'will fall before end of 2008'

Having been held at 5.75 per cent for September, the base rate of interest is likely to stay consistent for the coming months before falling in 2008, it has been claimed.

In a prediction that will be welcome to people looking for remortgages as their existing deals come to an end, the Scottish Widows Investment Partnership (SWIP) said that a six per cent interest rate is now only a slight possibility.

"The risk that the monetary policy committee may push rates up to six per cent or beyond over the next few months has now receded in light of the ongoing global turmoil in financial markets," said Richard Dingwall-Smith, chief economist at SWIP.

Mr Dingwall-Smith said that the tightening of monetary policy implemented in the past year is already eliciting responses from the economy and the housing market.

The Bank of England has also succeeded in its aim of bringing inflation below its target of two per cent.

"Against this economic background, we continue to see scope for official interest rates to be trimmed back to levels of around 5.25-5.5 per cent by the end of 2008, reducing the pressure on homeowners," Mr Dingwall-Smith said.

The effect of higher interest rates on borrowers approaching the end of fixed-rate products was recently illustrated by Nationwide, which urged customers to look for a remortgage deal to protect themselves from a 'rate shock'.

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