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Base rate 'may go to zero'

Base rate 'may go to zero'

Category: Mortgages

Updated: 02/02/2009
First Published: 02/02/2009

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The Bank of England could lower the base rate to zero per cent in the coming months, it has been suggested.

According to the centre for economics and business research, the Bank's monetary policy committee (MPC) is likely to use interest rate cuts as a means to avoid the possibility of deflation.

"We think they are heading down towards zero," said senior economist Charles Davis, noting that the cuts could stop at 0.25 per cent or go even lower.

And he added: "We see them staying there for a very long period of time; almost inevitably through the rest of 2009 and into 2010."

Should Mr Davis' prediction come true, it could lead to reduced rates for borrowers with secured loans or mortgages. Last month the MPC brought the rate down to 1.5 per cent - its lowest-ever level - and its next decision is due to be announced later this week.

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