Butterfield Bank has announced that in line with the recent increase in the US Federal Funds Rate, it has adjusted its prime rate, or base lending rate, for US and CI dollar lending for residential mortgages, consumer loans and corporate loans.
These prime rates will increase by 0.50%, effective Friday, 6 May 2022.
Selected deposit rates with terms of 90 days or more will be increased in line with the market, the bank said.
The Federal Reserve on Wednesday raised its benchmark interest rate by half-a-percentage point. It was the largest raise since 2000.
The Federal Funds Rate is the rate at which US banks borrow and lend to one another overnight.
In the US and the Cayman Islands, variable interest loans and mortgages are typically pegged to the fed funds rate and priced as a margin on top of that rate. Any US interest rate increase therefore translates into higher loan interest and savings rates in Cayman for many financial products that are subject to floating interest rates.
The Fed indicated that it may raise rates again by the same margin at the next two meetings of its Federal Open Market Committee in June and July, but a 0.75% raise was also on the table.
This week’s increase followed a quarter-percent raise in March.
The Fed has taken a more aggressive interest rate policy stance this year to tackle high inflation.
With more rate rises expected the Federal Funds Rate could be as high as 2.5% to 2.75% by the end of the year.
While this may contain consumer price growth, it will come at the cost of significantly higher borrowing charges.
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