Butterfield Bank will raise residential mortgage rates if the US Federal Reserve hikes rates next month by 25 basis points, as happened a year ago.

The revelation came from one of the bank’s senior executives in Butterfield’s third-quarter earnings conference call with analysts.

Many market traders are predicting the Fed will lift the rate. It last did so in December 2015, raising it by 0.25 of a percentage point, or 25 basis points, from near zero.

Among traders, the expectation of a December rate rise was touted as a 76 per cent probability on Friday, according to Bloomberg. That is the highest level since May.

A year ago, when the Fed rate went up, Butterfield raised its commercial base rate for small businesses but left its residential mortgage rate unchanged.

If the Fed moves rates next month, Butterfield will look to reprice its commercial and residential mortgages in Bermuda.

During the conference call, Dan Frumkin, chief risk officer, answering an analyst’s question, said: “If we see a 25 basis point rate, we would reprice both the Bermuda commercial and Bermuda residential mortgages.”

He said the bank would anticipate moving rates across all of its US dollar loan books in Bermuda and Cayman Islands “pretty shortly thereafter a Fed move, if we get one”.

There would be a 60-day notice period to borrowers ahead of any rate move.

Mr Frumkin mentioned the bank’s decision not to raise residential mortgages in Bermuda last December, adding: “So, the sense that we have in our marketplace is that it will be somewhat expected that [with] this next move we will take action on both sides.”

Butterfield Bank’s personal base lending rate is 3.75 per cent, while its variable mortgage rate is 6.75 per cent.

HSBC Bermuda’s personal lending rate is 3.5 per cent, while its personal variable mortgage rate is 6.5 per cent.

Clarien Bank raised its personal lending rate by 25 basis points to 3.75 per cent in June.

The Royal Gazette asked Clarien Bank and HSBC Bermuda how they will react to a future Fed rate rise. HSBC said it had no comment. Clarien has not issued a response at press time.

Disclosure: the writer owns shares in Butterfield Bank