Tuesday, May 5, 2009

Bank Rate

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

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.

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.

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