Just hot off the press, the Federal Reserve Bank of New York this afternoon surprised everyone by raising the discount rate from 0.50% to 0.75%. This is a 25bp hike and represents what could be the beginning of a new shift in policy. The Discount rate is the emergency lending rate that the Fed will lend to banks. You may have heard the term “The banks are borrowing at the discount window” It effectively raises the cost of borrowing to the banks which makes it harder for the banks to make money. hmm, sound odd? Although this isn’t a change in monetary policy don’t expect the fed funds rate to stay where it is for long. This is all in the USA of course, how does this affect Barrie Real Estate? The Bank of Canada will be watching developments closely and given our overheating real estate market I would expect any movement in the fed funds rate to be quickly followed (Or preceded) by a move in Canadian rates. Stay tuned, if we get wind of a move we’ll let you know. In the mean time, given the CMHC announcements yesterday and this move from the Fed today, it would behoove anyone considering taking out a mortgage to high tail it down to their local mortgage broker and lock in a rate, even if they don’t end up using it.

Regards to all,  Ian

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