IT contractors might hold on to their jobs this year, but recruiters are predicting 2008 will spell an end to bumper rate hikes.

Last year was a tumultuous one for contractors, with many suggesting they could be for the chopafter the credit crunch, and reports being published on how they are fleeing finance for other areas.

However, recruiters say the end of last year was as strong as ever, but rates – which have soared in the last five years in the wake of increased IT spending and high demand for limited talent – may level off in 2008.

Chris Pearce, senior consultant at recruiters Huxley Associates, says: “When a contract extension comes around, it’s pretty standard to increase rates, but banks have now been saying this isn’t going to happen because of the market conditions.”

Paul Elworthy, associate director in the IT and banking finance division of recruitment firm Hudson, says: “A buoyant market has seen rates escalate over the past few years, but my feeling is they will plateau this year.”

But this might not be across the board. Gary Chatfield, director of corporate accounts at contract recruiter MSB International, reckons investment banks are still hungry for contractors with SAP, Oracle and Murex skills, with experience in profit driving areas like equities and derivatives. Rates for these roles come in anywhere between £600 to £1k a day, he says.

Will rates be sliced if things get worse? Chatfield thinks not: “It would take a very brave bank to step forward and cut all contractor rates by, say, 10%. JPMorgan, Credit Suisse, UBS and Citigroup all stuck together to do this in 1997-98 and actually lost very few people because it was the way the market was going. But if one bank does it, others would have to follow suit to make it work.”

Anecdotal evidence from eFinancialCareers’ readers suggests some contracts already aren’t being renewed. Let us know if this has happened to you.