Northern Rock's move into the Irish savings market has taken the Irish financial institutions by surprise but there is little doubt it is further good news for Irish consumers.

Irish banks and building societies attempted to play down the impact of their newest competitor on core savings products yesterday in much the same way they tried to dismiss Bank of Scotland as a serious player in August.

Despite the bravado, soon after the Scottish bank announced by far the most competitive mortgage rate on the market, all Irish financial institutions were forced to move towards this rates to hold on to customers. The question now is how long will it take them to see what they can do for their depositors?

With interest rates at historically low levels here, it is virtually impossible for savers to achieve a decent income from their funds. At the moment, the EBS and Irish Nationwide offer an interest rate of around 4 per cent, but this is typically for funds of over £10,000 which must be held at that institution for one year.

Otherwise customers with an ordinary demand deposit account are offered around 0.1 of a percentage point in interest and that is normally only paid on funds of more than £3,000.

The Irish institutions will argue that Northern Rock's direct savers account is not a traditional demand deposit account and, as such, is not directly comparable with its matrix of rates. For customers this argument is largely redundant if Northern Rock proves it can effect withdrawals within four working days.

Just what happens next will depend on the response of Irish savers. Northern Rock claims its market research has shown that Irish people are willing to put their money on deposit with a new player if the rate of interest is attractive enough.

If this proves to be the case and sufficient number of customers show an interest in switching to Northern Rock, Irish rivals will have to respond.

Over the years much has been made of the importance of having a branch network to win new business. Some institutions here have suggested that Irish consumers tend to be rather cautious about where they put their money and will be loathe to place a deposit with a faceless institution.

The growth in telephone and internet banking is changing these perceptions though and may well benefit Northern Rock. The Consumers Association of Ireland has welcomed increased competition in the savings market. Its spokesman, Mr Eddie Hobbs, said Northern Rock had "put it up to the Irish deposit takers".

Only a few months after an assault on the mortgage market, the Irish banks and building societies must now draw up a plan to defend their deposits as well.