The bank is bringing in a new method of quoting lending rates to accommodate shifts in interest rates.

From tomorrow, monetary regulations are being relaxed by the Bermuda Monetary Authority, and interest rates will vary according to market conditions.

Government said in the Budget that it would remove the seven percent ceiling, allowing banks to establish a base rate.

Also starting tomorrow, changes to the hospital levy will take effect, as will changes to the Government fee structure for companies.

The Bank of Butterfield is introducing a new method of pricing Bermuda Dollar conventional loans and overdraft facilities from April 1.

The base rate will be based on the cost of funds to the bank.

It will be adjusted periodically according to changes to these costs, said the bank.

Its base rate will be quoted daily in the Business section of The Royal Gazette . Total interest rates charged to customers will include a percentage "spread'' over the Base Rate. The amount of the spread will be assessed against the risk to the bank of the associated borrowing, and the length of the loan.

The bank will no longer charge an annual administration fee for new credit facilities, but will introduce a one time arrangement fee to cover set-up costs.

This fee will be charged at the time the funds are advanced. The changes in pricing structure should not increase the cost of credit to existing customers, unless there is a change in the base rate, nor will they apply to consumer loans, credit cards, or mortgage loans.