The cost of borrowing from the Bank of Butterfield has gone down by 0.5 percent as a reaction to changes in the United States interest rates.

And customers of Bermuda's second largest bank that have variable rate mortgages will also reap the benefit of the cuts in three months time.

The bank announced the changes to its Bermuda dollar base rate yesterday, which puts interest rate levels at 6.25 percent.

The amount of interest paid on savings, however, will remain the same and not also go down, according to the bank.

Customers with personal loans and mortgages at fixed rates will not be affected.

The rate will come into effect on Monday, January 15, 2001. A statement from the bank said it had "determined to leave the interest rates paid on high interest bearing Strata Savings Accounts and its Passbook Savings account unchanged.'' Richard Ferrett, executive vice president and chief financial officer at the bank, said: "We are pleased to pass on the benefits of lower US interest rates linked to the bank's Bermuda dollar base rate.'' The bank said it would now give three month's notice to existing customers with variable rate residential mortgages of a decrease in their interest rate by the same amount. The reduction will be in place by Monday, April 9, 2001.

"The bank is also pleased to announce that it has decided not to reduce the interest rates paid to customers with either Strata or Passbook Savings accounts,'' added Mr. Ferrett. "We recognise the importance of these savings accounts to a large section of our customer base and will look to maintain the current interest rate levels paid on these accounts for as long as possible.'' The bank's US dollar prime rate will also reduce by 0.5 percent to 9 percent from yesterday.