benefit variable rate mortgage holders.

Most people, here, may not realise that they actually have a variable rate mortgage because for so long the rate never changed.

On Wednesday, both the Bank of NT Butterfield and the Bank of Bermuda announced they had reduced their lending rates by one-half of a percentage point (0.5 percent). What will that mean to you? Depending on how your mortgage payment is structured, you may either have a lower total payment, or more of your same payment will be applied to your mortgage principal reduction. If you have a choice, you should opt for the second one, as your home will be paid off that much faster. If you are sitting on an older mortgage with a much higher interest rate, now is the time to shop around and see if it is worth refinancing your home at these new lower rates.

Even if Bermudians opt not to refinance, in the United States, home owners are refinancing at record rates. Who wouldn't if you can save a percentage point or two on your overall mortgage? This repackaging or mortgages will drive the homebuilding and constuction business forward. With cheaper lending rates, more folks can qualify for a mortgage and achieve their dream, owning their own home.

Savings rates will also fall: For many Bermudians, this is hard to understand.

Why are interest rates going up and down? This never used to happen. Somehow, they feel that it is not right and that the financial institutions may just be doing this on a whim (or to make more money). This is just not so. There is insufficient space today to discuss how financial institutions must earn money on their money (and the market forces that they are subject to themselves) in order to lend you money and/or pay interest on your money. Even the Government of Bermuda has its (your) money invested/custodied off the Island. Fluctuating interest rates, sooner or later, will affect every financial institution in Bermuda.