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Interest rate cut could fuel cheap mortgages

Date: Wed, 16 Nov 2005

New figures suggest that interest rates could fall and therefore boost the availability of cheap mortgage deals.

New data released by the Office of National Statistics on the Consumer Price Index (CPI) measure of inflation shows that inflation has fallen by 0.2 per cent during October – a sign that the Bank of England could consider cutting the interest rate in the near future.

Although inflation remains above the Bank of England's target of two per cent, it is hoped that low underlying inflation could convince the Monetary Policy Committee to make a change in the base rate.

"While it is clearly premature to sound the all-clear on inflation, the October consumer prices data are largely reassuring for the Bank of England and boost hopes that inflation has peaked," said Howard Archer, chief UK economist at the Global Insight consultancy.

"Consequently, we believe the door is opening for an interest rate cut early in 2006 if the economy fails to show sustained significant signs of improvement over the next couple of months," he added.

Any reduction in the interest rate is likely to be welcomed by potential homebuyers as it will boost the number of cheap mortgage deals on offer.


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