HSBC Bermuda mortgage holders face higher repayments after the bank announced yesterday it would increase its lending rate by 0.25 percent next month.

The increase, which becomes effective on September 1, takes HSBC's base lending rate for Bermuda dollar residential mortgages to 3.5 percent. Capital G Bank said last night that its base lending rate was 3.25 percent, while Butterfield Bank said its rate is 3.75 percent.

For a 25-year mortgage holder owing $700,000, paying a variable rate of eight percent today, the HSBC rise would equate to an increase of around $116 in the monthly repayment, according to the bank's online mortgage calculator.

At the same time yesterday, HSBC announced it was launching a 6.95 percent fixed rate mortgage for new mortgage customers that will remain fixed for the next five years.

The bank said the offer would appeal to those looking for the security of a fixed-mortgage payment or are interested in locking in a low rate for the next five years, amid economic uncertainty.

Todd Wilcox, head of Personal Financial Services for HSBC Bermuda, said that in other jurisdictions such as the US and UK, mortgage rates are driven largely by the country's central rate policy and not by the lenders.

"In Bermuda, we watch these rates, but are not tied to them in lockstep. On several occasions in the past, the bank has lowered lending rates of its own accord - without being prompted by movements in these jurisdictions.

"The fact is that we have been priced at least 0.5 percent lower than our main competitors on our lending products for quite some time now. With this increase, we are still priced competitively in the market.

"HSBC rates are already very competitive, and the variable rate mortgage is still lower than the major competitors on the island.

"As the bank is committed to providing flexible mortgage options to the market and currently is the only lender still writing loans up to 95 percent of property value, it is important that we price our loan products appropriately in order to maintain that flexibility.

Renee Bullock-Cann, HSBC Bermuda's head of branch network for personal financial services, said the new fixed-rate mortgage might help to encourage some buying in the local real estate market.

"We are seeing a number of new customers who have delayed their buying decisions based on the current economic uncertainty," she said.

"We have created this product to give those clients the security of a constant monthly payment, which will help them to better plan their finances."

Ms Bullock-Cann said the fixed rate offer would protect borrowers against potential further rate increases for the next five years.

"We have seen low rates for an extended period of time, meaning the likelihood that we will see increases over the short-term is significant," she added.

A spokesman for Capital G Bank said yesterday that it "looks at each lending opportunity individually so as to understand the unique needs of the client and builds a comprehensive lending plan including rates, payment plans and savings structures that are most appropriate for the customer".