Following Wednesday's quarter-point rate cut by the US Federal Reserve, the Bank of N.T. Butterfield announced yesterday that it will lower its base interest rate by 0.25 percent to 5 percent.

The rate change, which will take effect on July 9, will put the Bank of Butterfield in line with the Bank of Bermuda, which declared a five percent base rate when the Fed cut interest rates in May. On Wednesday, the Bank of Bermuda said it had no immediate plans to lower rates any further.

This is the sixth time the Fed has lowered rates this year in an attempt to boost the sluggish economy in the United States, and the federal funds rate now stands at 3.75 percent. Investors hoped the rate cut would be half a point and equal previous rate cuts this year.

In Bermuda, both banks are charging the lowest interest rates since Bermuda Dollar base rates were introduced seven years ago to determine what the banks charge to borrowers and what they pay depositors.

The change will likely have the greatest effect on Butterfield's borrowers, who will pay lower interest rates on loans. The bank said customers with variable-rate mortgages will begin paying the lower rates three months from now on October 1.

The bank said the rate change will also affect US dollar Strata and passbook and Bermuda dollar passbook savings accounts, which will earn rates 0.25 percent lower than before.

But the change won't impact holders of the bank's popular Bermuda Dollar Strata Savings accounts. These accounts will continue to accrue 3.75 percent annual interest on balances up to $25,000 and 4.25 percent for balances of $25,000 and over.

"We will look to maintain the current interest rates levels paid on these accounts for as long as possible," said chief financial officer Richard Ferrett, who added that these were the bank's most popular savings accounts.