UK interest rates could rocket to 16 times the current base rate within the next two years, warns a British economist.

Andrew Lilico of Policy Exchange believes that to keep inflation down to 10% a year, the country might have to put up with interest rates as high as 8% -- a figure 16 times higher than the current base rate, which is at a record low of 0.5%. Bank of England deputy governor Sir John Gieve believes that the base rate could already go up to 2.5% this year.

An 8% interest rate could mean an additional £900 to the average monthly home loan bill, as average mortgage rates would rise from 4% to 11.5%. 

Lilico also predicts that the UK will go into a double-dip recession in early 2011, followed by a boom caused by quantitative easing.