bank rate

For the company, see Bankrate.

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply.

United States

Various Uses for the Term "Bank Rate"

The term bank rate is most commonly used by bankers to refer to the Federal Discount Rate of interest charged to Federally Chartered Savings Banks. The term bank rate is commonly used by consumers to refer to the current rate of interest given on a savings certificate of Deposit. The term bank rate is most commonly used by consumers who are interested in either obtaining a purchase money mortgage, or a refinance loan, when referring to the current mortgage rate.

Types of bank interest rates

• Bank rate on a Certificate of Deposit "CD".
• Bank Rate on a credit card or other loan
• Bank Rate on an automobile or real estate loan

used to have a close relation with consumers Bank Rate[current rate of interest]. With an increase in Bankers Bank Rate the Consumers Bank Rate also used to increase. With vast changes in Bank Financial Structure and with less dependency on Central Bank for financing customers credit, the control on Bankers Bank Rate has very less impact on Consumers Bank Rate.

Consumer Use of the Current Bank Rate

Consumers will check the current "Bank Rate" by comparing CD rates in the local newspaper or by visiting website's online, in order to determine which will pay the highest Annual Yield on their savings. Consumers will compare mortgage interest rates by visiting mortgage websites that show the various rates of interest of mortgage companies.

Difference between Bank Rate and Repo Rate

While repo rate is a short-term measure, i.e. applicable to short-term loans and used for controlling the amount of money in the market, bank rate is a long-term measure and is governed by the long-term monetary policies of the governing bank concerned.

Regional Bank Rate

Though influenced heavily by the Federal Reserve Interest rate, all bank rates will vary regionally. It pays to compare interest rates on a regional or state-wide level.

United Kingdom

In the UK bank rates are set by the Bank of England's Monetary Policy Committee. The key interest rate is called the official bank rate^[1] which is the lowest rate at which the Bank acts as lender of last resort to the money markets.

Canada

In Canada, the bank rate is defined as the upper limit of the overnight rate band announced each month by the Bank of Canada, (making it the target overnight rate + 0.25%).^[2]

References

• List of New York Lenders, Websites, and New York Bank Rate Data
• Tiscali reference article
• MybankTracker.com : Bank Rate source
• Bankrate.com : Bank Rate source
• ThePiggyBanker.com : Bank Rate Source
• Banx.com : Bank Rate Source

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