Interest rates drop to 4 per cent

Banks in Cayman have dropped prime interest rates to 4 per cent, the lowest it has been since mid-2004.

The local drop follows an announcement by the US Federal Reserve that it was dropping the US rate by half a point on Wednesday.

The funds rate in the US has not been lower since 1958, when Dwight Eisenhower was president.

It is the second time this month that interest rates have dropped. Banks also cut half a per cent from rates on October 8.

Mike McWatt, deputy managing director of Butterfield Bank said: ‘All the banks typically respond within 24 hours [of the Fed rate cut].’

Mr McWatt said Cayman had not seen a significant trend in borrowing behaviour from consumers since the adjustment earlier this month.

‘Obviously, everyone looks initially at how it will affect them specifically. It will impact different banks in different ways locally,’ he said.

Ormond Williams, president of Cayman National Bank said his bank had dropped CI rates on Wednesday at the same time it dropped US rates.

He said the rate drop meant this was a good time to borrow from banks, but urged prudence.

‘It’s a good time for people to borrow because the rates are low, but like I always say to clients, you need to be careful not to over-extend yourself,’ he said, adding that customers must consider that the rates would climb back up at some point and could impact their debt servicing arrangements.

The lending interest rate drop will automatically lead to a lowering in interest on deposits, he said.

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