Two isle banks lower
Staff and wire reports
prime lending ratesHawaii's top two banks today followed their larger mainland counterparts in dropping lending key interest rates after yesterday quarter-point rate cut by the Federal Reserve.
Bank of Hawaii and First Hawaiian Bank this morning separately announced that they were cutting their prime lending rates, the interest they charge some of their most creditworthy customers. The banks slashed their prime rates to 8.25 percent from 8.5 percent.
The move was expected after yesterday's decision by the Fed's policy-making Open Market Committee to cut the federal funds rate, the interest banks charge on overnight loans, a quarter percentage point, to 5.25 percent from 5.5 percent.
Today, major banks on the mainland, including Chase Manhattan, Bank of America and Bank of Chicago, dropped their prime rates to 8.25 percent.
Lower rates will mean lower borrowing costs for many households and businesses down the line, but also diminished earnings power for those already contending with skimpy returns on savings.
"Savings rates are apt to drop faster than borrowing rates, as they have in the past," said Robert K. Heady, author of "The Complete Idiot's Guide to Managing Your Money," and a veteran interest rate tracker. "It's going to take at least two months to feel the full effect . . . on the borrowing side."
Norwest, a leading regional bank based in Minneapolis, was the first to respond to the Fed action yesterday. Norwest reduced its prime to 8.25 percent from the 8.50 percent that has prevailed in the industry since March 1997.
It was the first cut since February 1996 in the prime, which generally moves in lock step with the fed funds rate.
The Fed's rate cut was aimed at helping limit damage from the financial crises in Asia and Russia. The global turmoil has hurt the U.S. economy by reducing export sales and pinching profits of exporting companies, sending stock prices sharply lower.
Heady said consumers should see lower credit card and home equity rates in their November statements, but the effect on adjustable rate mortgages won't occur until the lenders' next adjustment date. He predicted little change in fixed mortgage rates, already at 30-year lows.
Rates on new car loans would fall between 0.10 and 0.15 percentage point, from the current average 8.63 percent; home equity loans would drop around a quarter percentage point, from the current average 9.33 percent, Heady said.
CD yields should start changing in a few weeks, declining anywhere from 0.15 to 0.20 percentage point, Heady said. The current average rate on a six-month CD is 4.60 percent; the one-year average, 4.82 percent; and 5-year, 5.12 percent, according to the West Palm Beach, Fla., publication Bank Rate Monitor.
CD and other savings rates have slipped since last year along with bond rates.
