In keeping with a policy to align interest rates with that of the United States, the Bank of Bermuda yesterday announced it was lowering its Bermuda Dollar base rate by 0.5 percent, to 5.25 percent, effective May 1.

Existing variable rate mortgage holders should have lower monthly repayments come May. And interest rates, already the lowest in seven years, will be even lower.

The base rate is the benchmark for pricing demand loans, mortgage loans and overdrafts in Bermuda Dollars.

It is the third interest rate reduction by the Bank of Bermuda this year alone and follows efforts by the US Federal Reserve to prevent the US economy from sliding into recession.

The Bank of Bermuda first lowered its base rates in the second week of January after the Federal Reserve cut short term interest rates.

The Bank of Butterfield also cut rates in response to the Fed move. In February, the Bank of Butterfield announced a further rate decrease -- to 5.75 per cent -- its lowest in two years. That change takes effect May 7.

Last month both banks brought their rates down again by half a percent, leaving the Bank of Bermuda's rate at 5.75 percent -- higher than its competitor's.

The latest rate cut by the Fed -- announced yesterday -- brought the overnight Bank rate down by another half a percent.

A Bank of Bermuda press statement said that rates for deposit accounts are "under review''.

"Bank of Bermuda loan customers will receive confirmation of the decrease in rates in their next account statement,'' said the press statement. "In the meantime, customers may contact their account administrators for further information.'' Bank of Butterfield officials could not be contacted by press time.