Following the emergency budget on 22nd June, the centre for economics and business research (cebr) is predicting that UK interest rates will now remain stable at 0.5% until the end of 2012.

Douglas McWilliams, chief executive of cebr, said: “The chancellor had noted Mervyn King’s remark at the recent Mansion House dinner that if growth was slower then interest rates would be lower.

“We agree with his analysis and with our lower growth forecast we now believe that base rates will be stable at 0.5% until the end of 2012 and that the UK 10 year bond yield will fall to 3%. With base rates set lower for a longer period, we also expect mortgage rates to fall from around 4% at present to 3% by early next year.”

McWilliams said: “We are much more bearish about the economy than the Office for Budget Responsibility (OBR) and expect UK economic growth in the next three years to average 1% rather than 2%.

“We also see the tough decisions in the Budget as putting the recovery more at risk, but we do not see a double dip recession ahead – though we expect little growth in consumer spending over the next two years and think that it will only be 2013 before a sustained export and investment boom takes hold.”