Mortgage holders received a boost yesterday when both the Bank of Bermuda and Capital G Bank announced a 0.5 percent cut in lending rates.

The banks' action followed yesterday afternoon's move by the US Federal Reserve to cut its influential Fed Funds rate by 0.5 percent to one percent.

Butterfield Bank also said it would be reviewing its rates.

Bank of Bermuda's base rate for personal lending is now 3.25 percent. The rate reduction will apply immediately to all mortgages and loans, the bank said in a statement yesterday.

Bank of Bermuda chief executive officer Philip Butterfield said: "Bank of Bermuda has decided to once again pass on the reduction in interest rates made by the US Federal Reserve to our customers.

"This marks the bank's fourth reduction in interest rates this year. In total, we have reduced the cost of borrowing for all of our personal customers by 1.75 percent during 2008.

"Our objective is to provide competitive rates to support our customers during these uncertain economic times. In determining our base rate, Bank of Bermuda takes into account a number of factors not limited to but including, the US Federal Funds rate, along with local market conditions."

Capital G Bank president and chief executive officer John Kephart had more good news for borrowers.

"In light of the reduction today in US dollar rates by the Federal Reserve and the likely deflationary effects of lower commodity prices and weaker economic activity, Capital G Bank will be reducing their BMD lending rates by one half of one per cent (50 basis points), with immediate effect for new loans and with effect from January 30, 2009 for current outstanding loans," Mr. Kephart said.

Meanwhile, a spokesman for Butterfield Bank said the bank was reviewing its Bermuda dollar rates in light of the Fed's decision in the US. At the close of business yesterday, the bank's rates remained unchanged.