Interest rates in Cayman are about to go up again with island banks confirming they will follow the US Federal Reserve, which pushed up rates by another quarter of a percent on Wednesday.
There’s some temporary respite for homeowners, already struggling to cope with rocketing mortgage repayments, however as local banks have followed through on promises to delay implementing such rate increases for at least 30 days.
This is the first time since the Fed commenced its exercise of consecutive rate increases that hikes have not been immediately applied locally.
It follows discussions between Premier Wayne Panton and the Bankers Association to ease the pressure being felt by consumers.
Last month Cayman banks agreed to give a minimum of 30 days notice before passing on any new interest-rate hikes on to customers over the next 12 months.
Premier Panton had initially asked for a two-month delay in passing on any new interest rate increases, publicly expressing disappointment when they declined to comply.
The Cayman dollar is pegged to the US dollar so any rate increases by the Fed will filter down to local financial institutions.
Cayman setting its own interest rates, independent of the US Federal Reserve, has been dismissed as unworkable by industry experts.
US Fed Chair Jerome Powell announced that US Prime Rates will increase by a quarter percentage point, Reuters reported Wednesday.
“The hike, the Fed’s 11th in its last 12 meetings, set the benchmark overnight interest rate in the 5.25%-5.50% range, a level last seen just prior to the 2007 housing market crash and which has not been consistently exceeded for about 22 years,” Reuters reported.
The increases are being used as a measure to control inflation in the US.
In response to the hike local banks, including Butterfield Bank (Cayman) Limited, Cayman National and RBC Cayman announced rate increases in step with the hike from the Fed.
Butterfield, in a statement Wednesday, announced that it will be adjusting its Prime Rate for US and CI dollar lending.
“The US and CI dollar prime rates for residential mortgages, consumer loans and corporate loans will increase by 0.25% to 8.50% effective August 25,” it said in a statement.
Similarly, Cayman National, in a post on its social media pages, stated that its rates will increase effective 25 August.
“Our CI$ and US$ Prime Lending Rates will increase from 8.25% to 8.5%. All products linked to CI$ and US$ Prime Lending Rates will be adjusted on this date. Our Fixed Deposit Rates will continue to be monitored for further adjustments,” Cayman National stated.
RBC Royal Bank, through a notice, stated that it too will be increasing U.S. Prime rate by 0.25% from 8.25% to 8.50%.
However, that increase takes effective August 28, 2023.
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