Mortgage repayments are coming down for almost all borrowers over the coming weeks and more should follow.

Just last week the European Central Bank cut interest rates by a quarter of a percentage point to 4.25 per cent. All lenders are broadly following suit. Borrowers with the larger banks should see the benefit of the reductions immediately, Irish Permanent's will follow in a week or so while borrowers with First Active will have to wait until the beginning of October to see the benefit in their repayments.

Most economists and market analysts expect further reductions over the coming months. At the moment the money markets are predicting base European rates of about 3.75 per cent by March of 2002, which would be another half percentage point cut. Others are more optimistic again. According to Mr Jim Power, head of investment at Friends First, rates should have reached this level by the end of December. The ECB itself is giving no clues and, as with all things market related, predicting with any great degree of accuracy is well nigh impossible.

Much depends on the course of the US economy and on the German and French recoveries. A prolonged recession in the US would continue hitting demand in Europe and would make further interest rate cuts more likely. This would mean quite substantial savings for all those on variable rate mortgages. In an environment where rates are likely to be falling it should make sense to stay in a variable rate loan rather than taking out a fixed rate.

For example, Irish Permanent's new rate will be around 5.6 per cent if another half percentage point of cuts arrives and it follows suit that rates would be 5.1 per cent. That is below many fixed rates.

Following the most recent rate cuts, a borrower with a 20-year loan paying 5.6 per cent for £150,000 (€190,460) would have a repayment of £1,040 (€1,320) with a rate of 5.1 per cent that would fall to £998.00 (€1,267).

If interest rates do fall another half percentage point then the best rate on the market is likely to be below 4.9 per cent which would be a repayment of £981.00 (€1,245) on a £150,000 (€190,460) loan or £654.00 (€830) on a £100,000 loan. It is possible to get a one-year fixed-rate loan with AIB for 4.99 per cent. This is quite a good deal.

However, a one year fixed-rate is not very long and is only really any good for those seeking security in the first year. The two-year loan is far more expensive at 5.69 per cent from AIB while the three year loan is 5.9 per cent. Both of these should come down as interest rate cuts feed through.

Of course, if you simply could not afford to repay more than you are already doing it could make sense to fix now. That way you are paying for peace of mind. But if there were to be a dramatic recovery in the global economy, or inflation were to take off again in Europe, you would be covered against a raise in your variable mortgage repayment.

All rates correct at time of writing.