Hard-pressed householders across Northern Ireland are expected to receive an early New Year’s boost in the form of further interest rate cuts.

The Bank of England Monetary Policy Committee meets today and is poised to reduce the UK base rate to a 314-year historic low when it announces its deliberations tomorrow.

Homeowners could benefit from a reduction of up to 1.5%, according to some economists, which would take the UK base rate from 2% to 0.5%.

The Bank's Monetary Policy Committee is widely expected to cut interest rates by at least another 0.5%.

That would reduce monthly repayments on a £150,000 mortgage by around £40 or £480 a year — if lenders pass on the cut in full.

However, a 1% reduction would slash them by £80 per month or £960 over 12 months and a 1.5% cut would result in a saving of £120 per month or £1,440 annually.

Northern Bank chief economist Angela McGowan said: “It would not be a surprise me to see the UK base rate at 1% or perhaps even lower in the near future.”

It would be the fourth consecutive month that interest rates have dropped, providing some good news for people with mortgage repayments.

In October interest rates fell by 0.5% to 4.5%, in November they plummeted by 1.5% to 3% and last month they declined by 1% to 2%, taking the official cost of borrowing to a 54-year low.

Speaking ahead of the MPC meeting, Ms McGowan said: “A downward move in interest rates is good news for households and consumers. Such cuts should go some way to bolstering consumer confidence, enabling many to start the New Year with more disposable income in their pockets. The hope is that inter-bank lending rates will follow suit by reducing the cost of borrowing for both consumers and local businesses.”

Ms McGowan added that such cuts will contribute to the UK’s economic recovery, which she believes will begin at the end of this year.

“This represents a significant shot in the arm for the economy, but it also illustrates how sick the patient is.

“But I expect the Northern Ireland economy will not be hit as hard as other UK regions.”

Economists are unanimous in expecting that the MPC will cut rates further tomorrow. The only uncertainty is over whether the cut will be by an anticipated minimum of 0.5% or forecast maximum of 1.5%.

Ulster Bank’s economist Richard Ramsey said: “Clearly, the benefit of the interest rate cut to borrowers will depend on the terms and conditions of their mortgage product, with some — notably those on base rate trackers — benefiting more than others.”

And the Bank of England’s deputy governor, Charlie Bean, recently indicated that interest rates could fall as low as zero.