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US rate rise to be felt by some borrowers

Some borrowers in Bermuda with residential mortgages, commercial loans or corporate loans will pay more interest after the US Federal Reserve raised interest rates.

In response to the quarter percentage point hike in the US, Butterfield Bank said it is adjusting its interest rates on fixed-term deposits and loans.

However, Clarien Bank is keeping its rates unchanged, while HSBC Bermuda has not announced any change and said if there is any impact on its rates, these “will be communicated through our usual channels”.

The Fed's interest rate hike was the fourth this year and the ninth since 2015. It lifted its interest rate by 0.25 of a percentage point, to a target range of 2.25 to 2.5 per cent.

It is now estimated that the Fed will raise interest rates twice in 2019, rather than three times as was previously forecast. The change in sentiment is said to be because of concerns about slowing growth in the US and elsewhere.

Bermuda has no rate-setting central bank and the island's lenders have frequently followed the Fed's lead. In September, when US rates last rose, Butterfield increased its lending rates in line with the Fed's 0.25 percentage point change.

Reacting to the Fed's latest increase, Butterfield said the base rate for Bermuda dollar residential mortgages and consumer loans will increase by 0.25 per cent to 5.5 per cent. The base rate for Bermuda dollar corporate loans and US dollar loans will increase by 0.25 per cent to 6 per cent.

The loan rate increases take effect on December 27, while the Bermuda residential mortgage interest rate changes will be made on March 19.

For savers, there will be an interest-rate increase of between 0.1 per cent and 0.25 per cent on Bermuda dollar and US dollar fixed-term deposits with terms of 90 days or more. Those changes will take effect on December 27.

Clarien Bank's base lending rates will remain unchanged. Its Bermuda dollar base rate for personal mortgages stays at 4.5 per cent and 4.75 per cent for commercial mortgages. In September, the bank also left its base lending rates unchanged after the increase in the Fed Funds rate.

Ian Truran, chief executive officer of Clarien Bank Limited, said: “The decision not to increase base lending rates reflects our commitment to constantly assess overall market conditions globally and the impact it has on our local economy.

“We are intensely mindful of how base lending rate changes impact our clients, and after carefully analysing several different factors including the rise in the US Federal Reserve rate, it has been determined that we will not increase our base lending rates at this time.”

Clarien recently announced increases in its deposit rates, which it said was “providing clients with a broad range of products at competitive rates to secure and grow their savings”.

In a statement, Clarien said it will continue to review lending and deposit rates and make adjustments as needed “to ensure it provides a superior range of financial planning solutions for its diverse range of clients”.

An HSBC spokesperson said: “HSBC Bermuda considers multiple factors [including but not limited to, the Fed rates], in our ongoing reviews of the Bank's lending and savings rates. Any impact on the rates will be communicated through our usual channels.”

Butterfield Bank said anyone seeking information regarding rates and payment terms should contact its Consumer Credit department on 298-4799. Information regarding Clarien Bank rates is available at www.clarienbank.com.

• This story has been updated to include details of Butterfield Bank's announced rate increases, and also a comment from HSBC Bermuda

Rates up: Federal Reserve chairman Jerome Powell said that the Fed was raising its key interest rate for the fourth time this year to reflect the US economy's continued strength. After the announcement, Butterfield Bank said it is adjusting its interest rates on fixed term deposits and loans (Photograph by Susan Walsh/AP)

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Published December 20, 2018 at 8:00 am (Updated December 20, 2018 at 8:24 am)

US rate rise to be felt by some borrowers

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