British rates stable unless house price collapse

BRITISH interest rates have now bottomed out unless house prices collapse, a report by The Ernst and Young ITEM club said.

Although economic growth is likely to undershoot finance minister Gordon Brown's targets for this year, the cost of borrowing probably won't fall from the current 48-year low of 3.5% this year, according to ITEM, which uses the same model of the British economy as the Treasury.

Any additional monetary stimulus would not have an impact until next year, by which time the economy will have returned to trend growth, risking a return to boom and bust, the report said. "There will be little point in reducing rates below 3.5% as the impetus would only come through next year and by that time the economy will be in upswing," said Peter Spencer, economic advisor to ITEM said.