A survey by the charity Shelter suggests that five million home owners will be unable to afford an interest rate rise and will be in danger of being evicted from their homes. It’s therefore no wonder that one of the questions on most people’s lips is ‘when will interest rates go back up?’ The problem is that there is a plethora of financial data, analysis and speculation on this topic and you never seem to get a straight answer. And fittingly that’s where the Money to the Masses ‘Interest rate clock’ (top of the right hand column) comes in.
Many of you may have heard of the Doomsday Clock, but in case you haven’t here is a brief description from Wikipedia:
‘’The Doomsday Clock is a symbolic clock face, maintained since 1947 by the board of directors of the Bulletin of the Atomic Scientists at the University of Chicago. The closer the clock is to midnight, the closer the world is estimated to be to global disaster. As of January 14, 2010 (2010 -01-14)[update], the Doomsday Clock now stands at six minutes to midnight’’
Over time this theoretical clock has been changed, in fact it had been reset 19 times, and was originally used to signify the threat of a nuclear war.
So in a similar vein, Money to the Masses has created the Interest rate clock. The premise is the same as that of the Doomsday clock but rather than Armageddon happening at midnight it will be the likelihood of a hike in interest rates.
So how does it work?
Well it takes into account a lot of the economic date, analysis and opinion I mentioned earlier and if a jump in interest rates is looking increasingly likely then the clock time will be moved closer to midnight. If it looks less likely then it will move away from midnight (with 23.45 broadly being the chance of an interest rate cut)
So, generally speaking 23:59 would mean that I expect an increase in interest rates imminently, i.e. within the next month or so. On the basis that I've set the start time as 23:55 I currently don't envisage an interest rate rise until the later part of 2010 at the earliest. (Edit- July 2010 : Make sure you click on the clock face in the right hand column to find out the latest time, as it has changed since this psot )
How often will it be changed?
Clearly given the volatile nature of our economy the interest rate clock will be changed a darn site more often than the Doomsday clock, that’s for sure.
What else can it do?
Obviously the Interest rate clock is subjective – so has to be taken with a dose of salt and certainly shouldn’t be used as the basis for making financial decisions. However, it does draw a line in the sand, with regard to interest rates movements, and thus provides a useful reference point from which to judge market sentiment towards interest rates.
Also, it will actually provide an interesting experiment of market sentiment vs. reality, as at some point in the future we can compare the clock timings against actual movements in the Bank of England interest rate. Plus, if there is an unexpected change in interest rates the clock will show just how unexpected it was.
So spread the word……………….the clock is ticking
This article and the Interest Rate Clock - Copyright © 2010 Money to the Masses