THE North-East requires another substantial cut in interest rates, according to The Northern Echo's Shadow Monetary Policy Committee which met in Durham yesterday.

But opinion fluctuated widely. One member felt that with prices falling, the recession was running its course, and interest rates should rise.

Three others voted for no change while four insisted that the Bank of England should cut the base rate by another one per cent to a historically low two per cent.

The committee, put together by the North-East Chamber of Commerce (NECC) and the building services firm Rok, heard evidence from Michelle Bond, a 22-year-old personal assistant who was looking to buy her first home in Darlington. She was offered a 95 per cent mortgage in August but that has now been replaced by a 90 per cent offer, meaning she has to double her deposit to £10,000.

"Where do I find that extra deposit?" she asked, "and I need it soon because house prices are coming down, and if the interest rate comes down my savings will not grow to fund that extra deposit."

Sedgefield businessman David Bowles reported that his firm Entrust was managing part of the fund launched by Lord Mandelson to provide loans to small and medium-sized businesses which cant get bank funding.

"Our initial share is £2m and we launched on Monday," he said. "By this morning we have had applications for £850,000. They range from £50,000 to £250,000. It is for companies which are trading profitably but need working capital to keep the wheels oiled and the people paid."

The committee agreed that more needed to be done to get the banks lending, and that the Government should look to building more social housing to kickstart the construction industry.

"Brickmakers are mothballing plants," said Robin Cairns of Rok. "Next year therell be a 15 per cent increase in the price of bricks and we will be importing bricks from Poland and eastern Europe."

David Coates, managing director of publishers Newsquest North-East pointed to fears that Teesside's chemical industry would be the next to be hit, and said: "Confidence is breaking down into pessimism. I dont think we have seen the full impact on the high street yet. Unemployment is starting to pick up and it will be six to 12 months before we will see it biting into everyday expenditure."

Mr Bowles added: "Confidence is like a virus. You go out on the streets of Durham and you won't find anyone who doesn't know someone whose job is in trouble."

Keith Proudfoot, Northern director of the Institute of Chartered Accountants, struck a slightly more optimistic note. "Our region is less pessimistic than others," he said. "We had Northern Rock on our doorstep so were aware the financial crisis was coming and took some good decisions in early 2008, whereas the rest of the country took longer to wake up."

Andrew Sugden of the NECC asked if another cut would be like "hitting the panic button" and Darlington entrepreneur Graham Robb feared further cuts would hit savers.

Voting for an interest rate rise, Bishop Auckland businessman John Elliott, of Ebac, said: "The big change was last March when fuel went up to £1.20, electricity, gas and food were all up and people cut back. Now those rises are being reversed and people are better off. There's a danger of over-reaction. We could go too far."

The Bank of England's committee makes its decision on Thursday.