Tuesday April 21,2009 

This is a note I found today regarding bank of Canada interest rates.  This should have a positive effect on Windsor and Essex county real estate buyers and sellers.  Lower interest rates mean higher buying power.  For those of us enjoying a rate tied to prime rate we will see another drop of .25 percent.  Lucky me, I will now have a rate of 1.45%.  Unfortunately the prime minus mortgage is no longer offered, it is prime plus.

OTTAWA - The Bank of Canada has taken its influential target interest rate to the lowest practical level in an effort to combat what it says is deeper and more widespread global recession.

The central bank sliced the overnight rate in half to 0.25 per cent - the lowest it says is practical - and signaled strongly it will have to keep it there until at least mid-2010.

In addition, the bank has extended the term of its purchase and resale agreements it uses to inject liquidity into money markets from one-and-three months to six-and-12 months, while setting minimum and maximum bids that correspond to the historically low target rate.

The bank said it will target a daily level of settlement balance in the financial system at $3 billion, a move it says will help drive the overnight rate to the bottom of the trading band.

The Bank of Montreal was the first of Canada's major banks to announce that it would lower its own prime rate in step with the central bank, dropping the benchmark around which it calculates variable mortgages and other loans to 2.25 per cent.

Shortly after, Royal Bank said it too would lower its prime rate to 2.25 per cent, signaling that the other chartered banks would likely follow suit.

The dramatic actions - and more are expected Thursday when bank governor Mark Carney unveils options for increasing the money supply - signal a new and darker view of the global and domestic recession than the Bank of Canada has previously admitted to.

"In an environment of continued high uncertainty, the global recession has intensified and become more synchronous since (January)," Carney wrote in an unusually lengthy note accompanying the interest rate decision.

"Deteriorating credit conditions have spread quickly through trade, financial and confidence channels. While more aggressive monetary and fiscal policy actions are underway across the G20 (countries), measures to stabilize the global financial system have taken longer than expected to enact."

As a result, Carney has basically thrown out the playbook for the Canadian economy that he outlined in January.