Interest rates could be cut four times next year

The first cut could come next month, a move that would be welcomed by homeowners struggling with crippling repayments.

This month, the base rate was lowered by a quarter point to 5.5 per cent.

Four cuts, each of a quarter point, would take the rate to 4.5 per cent – the level at which the Bank started to raise rates in August last year.

The prediction comes in reports from financial analyst, the Centre for Economics and Business Research, and the European bank BNP Paribas.

They believe that poor economic growth – expected to be 1.6 per cent next year – will force the Bank's hand.

Richard Snook, of the CEBR, said: "So far only the housing and financial markets have weakened significantly as a result of the credit crunch.

"However, we expect the flow of negative economic data to become more pervasive – supporting further action by the Bank."

A separate study today finds that house prices have fallen for three months in a row. Figures from housing market analysts, Hometrack, show a dip of 0.3 per cent for the month November-December – the largest fall for any month since December-January 2005.

The study puts the annual rate of house price growth for 2007 at 3 per cent, the lowest rate of growth since June last year. Agents are reporting price falls across 30 per cent of the country.

At the same time, the length of time it takes to find a buyer has reached 8.3 weeks, the longest period since the study began in 2001.

Hometrack research director Richard Donnell said: "The greatest turnaround in market conditions has been seen in southern England where the market is slowing off a high base.

"Many would-be buyers have stepped back from the market and the greatest short term casualty has been lower levels of market activity with sales volumes down by 18 per cent over the last 6 months."

Home repossessions will leap by 50 per cent next year as families struggle to keep up with monthly payments, lenders warned yesterday.

A study predicts that the number of homes repossessed will rise from 30,000 this year to 45,000 in 2008. This means more than 850 families could end up on the streets each week.

The data from the Council of Mortgage Lenders shows that 170,000 homeowners will be three or more months behind in repayments next year, compared to 145,000 this year.