Savings: Rate cuts ahead

The Bank of England is poised to leave interest rates unchanged when it announces its latest decision on Thursday.

The committee set interest rates on an upward path 18 months ago, but has left them unchanged since August last year.

Despite a small increase in house prices in December, analysts believe the market is under control and expect a soft landing.

That has negated the need for further rate rises and is likely to reduce any future pressure for a further rate increase.

Evidence of a poor Christmas at the tills has also backed up suggestions that the consumer credit boom has been brought under control.

The Bank is predicted to leave rates unchanged for a short period, with the city beginning to price in reductions in the second or third quarter of the year.

Future moves, however, are likely to depend on the housing market remaining cool.

Manufacturing has also warned that the recent rises have taken their toll on output and warn that any unnecessary rise could push many firms close to the brink.

As a result the Bank's cautious approach is now likely to focus on how to reduce rates over the year, without reigniting the housing market or raising high street lending.

The threat of tax rises after the next election is also likely to offset any upside home owners may receive from any savings in mortgage costs as a result of lower interest rates.