The New Year is likely to bring some good news for borrowers as interest rates on home and consumer loans could decline from the second quarter onward, but high fuel and food prices could play spoilsport by putting pressure on inflation, feel bankers and economists.

Experts feel that interest rates have peaked and with deposit rates on the decline, consumers could see softening of interest rates in 2008 as the prudent stand of the Reserve Bank for almost the whole of 2007 managed to keep inflation low without disrupting economic growth.

"Our margins were a bit strained during the year but now banks have begun reducing deposit rates. With RBI's objective of keeping inflation close to 3 per cent in the medium term, interest rates are bound to come down," said M.V Nair, CMD, Union Bank . of India.

Yes Bank managing director & CEO Rana Kapoor said: "We see no decline in interest rates in the next three months. The RBI is unlikely to reduce rates in January but there could be a reduction of half a per cent in the next fiscal starting April."