early Christmas present yesterday by announcing a half percent cut in interest rates.

But he will not be playing Santa Claus for people who do not keep up with payments. They will have to pay the old higher rate, he said.

Mr. Lines said the cut, which takes effect on December 1, was designed to ease the burden of the recession on customers.

"It's a Christmas present for the public of Bermuda, and it's an expensive present for us to give,'' he said.

Families with an average mortgage of $250,000 would now pay $100 less a month, he added. The mortgage rate would go down from nine percent to 8.5 percent.

"If the other banks and deposit companies were to follow suit, which is possible, it would make it easier for everyone on the Island to survive the winter.'' Mr. Lines denied the move resulted from an increasing number of homeowners not keeping up with their payments. Such people often got into problems because of bad habits rather than not being able to meet payments, he said.

He also denied the bank was reacting to rates coming down abroad. He added: "Concurrent with the half percent reduction on performing loans and Bermuda Home mortgages, the bank has announced interest rate reductions paid on fixed term deposits and call accounts. The reductions vary subject to the term of deposits.

"Depositors, however, are still able to obtain the maximum seven percent rate of interest on their funds provided they are willing to extend the term of such deposits.'' The deposit rate changes apply immediately. Consumer loans will not change.

Finance Minister the Hon. David Saul welcomed the move. "I congratulate them on it,'' he said. "It will help those small companies who are finding things difficult right now. And on the mortgage side, it's certainly a positive development.

"For the first time in 20 years we have the banks basically reflecting what's happening abroad.'' Bank of Butterfield managers are meeting this morning to decide how to respond to the move.