Bermuda's variable-rate mortgage holders got a boost yesterday when three of the Island's biggest lenders announced a a cut in their borrowing rates.

Butterfield Bank was the first to announce a 0.25-percent cut in its base rate.

HSBC Bank of Bermuda followed with a 0.5-percent cut, which was matched by Capital G Bank.

For a customer owing $500,000 on a standard 30-year mortgage, the announcements will mean a reduction in monthly payments of between approximately $80 and $170, depending which bank is the lender and what percentage of the value of the property has been borrowed. There will be no change in payments for holders of fixed-rate mortgages.

The other side of the coin is that savers will lose out, as the interest rates offered on some deposit accounts will also fall.

The news followed yesterday morning's announcement by the American central bank, the US Federal Reserve, of a 0.75 percent emergency rate cut, designed to give a shot in the arm to the American economy as fears of a recession mount.

The move was the latest in a string of US rate cuts since last September, which have now seen the 'Fed' cut its influential federal funds rate by a total of 1.75 percent. Bermuda mortgages rates have remained on hold during that time — until yesterday.

Butterfield Bank was first to make the call, saying it was reducing its Bermuda dollar base rate by 0.25 percent, to 5.00 percent, with immediate effect.

"We are pleased to pass on the benefits of lower US interest rates to our customers who borrow from us at rates linked to the Bank's Bermuda dollar base rate," said a spokesman.

"We are also reducing our US dollar prime rate to 6.5 percent effective the same date."

The Bank is leaving its Bermuda dollar Strata Savings rates unchanged for the time being. HSBC Bank of Bermuda said it would be reducing interest rates by 0.50 percent, for all mortgages, commercial loans, personal loans, and Bermuda and US Dollar credit cards, effective immediately.

Philip Butterfield, the Bank's chief executive officer, said: "At this stage in the interest rate cycle the bank has decided to reduce loan rates in concert with the actions taken by the US Federal Reserve today.

"It should be noted that Bank of Bermuda determines its base rate independently, based on a number of factors, including the United States Federal Funds Rate, set by the Federal Reserve Board, as a benchmark to remain competitive and provide the best possible service to our customers. We believe it is important to continue to maintain our low personal and commercial base rates in order to support our residential mortgage customers and small business clients.

"This rate reduction will be a welcome relief on monthly mortgage payments for our borrowing customers."

He added that the Bank's Bermuda and US dollar personal and corporate demand deposit rates would also be reduced immediately.

Capital G Bank also announced a cut of 0.5 percent in their lending rate for Bermuda dollar loans.

Chief relationship management officer Ian Truran said: "While Bermuda dollar rates do not always follow those in the US in complete lockstep we felt that conditions warranted this reduction.

"We weigh up a number of factors in deciding our interest rate levels and try to be consistent for both our borrowing and savings customers.

"Accordingly we have also cut the rate on our savings accounts by the same margin. We continue to frequently review our rates and will not hesitate to make further adjustments if conditions warrant."