The Bank of Bermuda boosted its Bermuda Dollar Personal and Commercial Base Rates by a quarter of a percent on Friday in a move mirroring an earlier hike by The Federal Reserve. Butterfield Bank and Capital G however will not follow suit.

The Fed increased its short-term interest rates on Wednesday by an additional 0.25 percent.

This is the fourth time in several months that it has increased the Federal Funds Rate. Michael Collins, head of banking services at Bank of Bermuda, said: ?We have decided to increase our Bermuda Dollar Personal and Commercial Base Rates by 0.25 percent, effective November 12, 2004, in direct proportion to the rise in the Federal Funds Rate.

?In April, we announced a unilateral rate reduction of 0.50 percent on all existing and new personal loans including mortgages.

?Since our April rate reduction, the Federal Reserve has increased short-term interest rates by one percent.

?We have chosen to absorb the cost of this market movement rather than to pass it on to our customers through higher personal lending rates.

?At this stage in the interest rate cycle, it is necessary for us to move in parallel with the Federal Reserve. Our increased Personal Base Rate of four percent continues to be the lowest in the Bermuda market, well below our competition.?

?The market has responded favourably to our pricing advantage and our mortgage portfolio has increased beyond our expectations. By offering the lowest rates, we continue to take the lead in supporting the expansion of the residential mortgage market in Bermuda.?

Richard Ferrett, Chief Financial Officer, Butterfield Bank, said that Butterfield Bank will not be changing its Bermuda Dollar Base Rate.

?This means that the Bank?s Bermuda Dollar lending rates will remain the same. Our decision reflects our continued commitment to offer highly competitive and innovative Bermuda Dollar residential mortgage and other lending services to the Bermuda Community Banking market.

The Fed?s changes however directly impact Capital G?s US Dollar interest rates, which will change in line with the Fed?s increase. Consequently, the Butterfield US$ Prime rate will rise to 5.00 percent and the Bank?s US$ Strata rate will rise to 1.625 percent for deposits of US$100,000 and over.

Capital G will not be raising rates either.

Capital G president and CEO Sarah Farrington said: ?Current Fed rates are only one of the factors that we consider when setting our rates. We also look at current liquidity, demand for loans and mortgages and our overall cost of funds. While we will continue to work with our customers on an individual basis to determine the best product structure for them, our rates will remain unchanged.?