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Home loans could get cheaper as sales fall

Interest rate cuts look increasingly likely after new figures reveal the worst June shopping record for 22 years.

Business body the Confederation of British Industry (CBI) uncovered the true extent of the shopper slow down with data that proved high streets had suffered their lowest trading figures for more than two decades.

However, the silver lining came from the fact that healthy sales during last year's Euro 2004 football championships slightly skewed the picture.

Nevertheless, things are looking bad - with or without this summer's heatwave - and summer sale signs are likely to be hanging in shop windows earlier than usual this year.

HSBC economist John Butler has labelled the findings "absolutely shocking".

He believes: "If the CBI weakness even partially comes through in the official data then the Bank of England will cut interest rates very soon."

That said however, another set of figures from the Bank of England show credit card lending more than doubled in May.

Simon Rubinsohn, the chief economist at fund manager Gerrard, noted the two separate reports offered "contrasting signals".

Some high street analysts now feel if the release of the sixth Harry Potter book does not provide a much-needed shot in the arm for retailers in July, rates could drop from 4.75 per cent as early as August.

Mr Rubinsohn added: "All eyes will be on the August meeting [of the BoE] and though we still believe the committee will eschew the opportunity to ease policy at this point, it could be a close call."