of N.T. Butterfield increasing its Bermuda dollar base rate by half a percentage point up to 6.5 percent.

An announcement is expected from the Bank of Bermuda regarding their interest rates today.

In a statement yesterday, the Bank of Butterfield said that the increase reflected the increase in the bank's cost of funds, as a result of increases in certain deposit rates.

The change affects those with conventional Bermuda dollar loans and overdraft facilities. The new rate does not apply to to consumer loans or credit cards.

The bank said short term US dollar rates have recently risen steadily with the US Federal Reserve Board's action last week to increase both its federal funds rate and discount rate by half of one percent resulting in a further widening of the gap between comparable short-term Bermuda dollar and US dollar deposit rates.

The bank said that it acted to correct the imbalance by increasing its Bermuda dollar rates to reflect the changed market conditions.

Butterfield's Bank's executive vice president of corporate management, Mr.

Colin Furr, said: "Lending rates will not change for the vast amount of our customers. And with the increase in the interest we will be paying on deposits, we hope to spur more people to save. The changes will benefit them.'' The new treasury rates for Bermuda dollar call and fixed deposits will increase by three quarters of one per cent on average, with an increase of one percent on money placed for one year.

The Bank's deposit taking subsidiary, Butterfield Mortgage and Finance Ltd., will be increasing deposit rates by one quarter of one percent on deposits placed for a two year term.

Back on the lending side, mortgage loan rates in general are unchanged for the moment, except for mortgage loans with a maturity of between five and ten years, which increases from 8.25 percent to 8.5 percent.

The cost of borrowing money includes the base rate together with a "spread'' that varies from 1.5 percent to 3 percent depending on the risk and term of individual loans.