Homeowners are set to get a boost after the Bank of Bermuda announced a reduction in interest rates by 0.5 percent immediately for all mortgages, personal loans and commercial loans.

The bank is leaving Demand and Savings Deposit rates unchanged at this time, but will continue to monitor market conditions. Commerical loans are now down to 4.5 percent, while personal loans are at four percent as a result of the cuts.

This cut comes on the same day that the Federal Reserve cut US interest rates to 2.25 percent from three percent in a bid to restore confidence to nervous financial markets and boost the ailing economy.

The reduction was smaller than financial markets had expected, with many economists believing the US economy is already in a recession and US Treasury Secretary Henry Paulson admitting earlier yesterday that the economy was facing a "sharp decline" at the moment, but hoped for a recovery later in the year.

The Fed has already taken strong action this week to avert a financial panic after investment bank Bear Stearns was forced into a fire sale to avoid collapse.

Elsewhere, British Prime Minister Gordon Brown promised that the UK and other European Union (EU) countries will "lead the way" in fighting "global financial turbulence", telling MPs that an EU summit at the weekend had agreed "co-ordinated action at a European and global level".

Philip Butterfield, CEO of the Bank of Bermuda, said: "Bank of Bermuda decided today to reduce loan rates in concert with the actions taken by the US Federal Reserve. Customers will recall that we reduced interest rates by 0.5 percent in January and we have again decided to follow the US Federal Reserve's lead in reducing Bank of Bermuda base rates. In total, we have reduced borrowing rates for all of our customers by one percent during the first three months of 2008.

"We continually monitor global interest rate trends in order to provide competitive rates to our customers. In determining our base rate, Bank of Bermuda takes into account a number of factors not limited to but including, the US Federal Funds Rate, along with local market conditions, so we can provide the best possible service to our customers.

"We believe it is important to continue to maintain competitive personal and commercial base rates in order to support our residential mortgage customers and business clients.

"We would encourage every homeowner and borrower in Bermuda to come and talk to us about our competitively priced mortgages and loan products."

A spokesman for Capital G said: "We will be looking at the effect on markets generally and will make a decision regarding any changes to deposit or lending rates in due course."