The UK economy is set to face the first deflation in over 50 years as it is expected that inflation will fall below 0.0% as it has already reached 0.5%. Thursday the inflation report is due from the Bank of England’s forecasters. A dip into deflation will likely push the threat of an interest rate hike by the Bank on standby until possibly 2016.

Dr. Howard Archer, chief UK economist at IHS Global Insight, said, “We currently believe it is borderline as to whether the Bank of England starts to raise interest rates at the end of this year or holds fire until early 2016.”

With the cost of living slipping low due to falling fuel prices and food costs declining due to competition from grocers it could be good news leading up to elections.

Deflation can be a hardship to economies as it makes debts harder to service, while consumers and businesses hold off spending and investing. Experts believe that the UK will experience a good deflation that will allow households to find some recovery. Experts view the UK economy as the strongest in the G7.

While the warnings of a hike by the Bank of England on the standard base rate are being tabled, the warnings of lenders raising their rates have not. Lenders are currently very competitive and when demand rises for remortgages and mortgages, the need for competitive rates will decline causing lenders to pull their best deals. Those seeking a low interest rate remortgage or mortgage deal should shop now while lenders are keen to offer competitive interest rates.