Bank of Ireland's recent decision to offer bridging loans at its variable mortgage rate, currently 4.6 per cent, may signal the beginnings of increased competition in this area of the home loans market.

The new rate, which the bank says is available to consumers regardless of whether their mortgage is with Bank of Ireland or not, is well below the rates charged by many of the other lending institutions.

Already, First Active has reviewed its bridging loan rate, which, at 12.7 per cent, was well above the rates generally on offer. It has cut its rate to 7.64 per cent although it still remains above the Bank of Ireland offering as do most of the other bridging rates on the market.

Irish Permanent, for instance, offers bridging finance at 6.29 per cent while EBS Building Society charges two percentage points above its variable rate which amounts to 6.5 per cent at present.

AIB says it does not have a specific bridging loan package but the bank typically offers its mortgage customers bridging loans at or around its variable rate. "If you have a home mortgage with us and are looking for a closed bridging loan, we look after the customer very well," says Mr Aidan Clarke, head of mortgage lending at the bank.

But such a deal is confined to the bank's existing customers.

The move by Bank of Ireland is interesting, not just because the rate on offer is very competitive but because it applies across the board. In the past, institutions have been slow to provide bridging loans to people who were not customers, making it difficult for people to shop around for such finance.

Mortgage advisers say that if you are not a customer, most institutions will charge an arrangement fee - usually between half and one per cent - on top of the loan rate.

Bank of Ireland's willingness to talk to all consumers, regardless of where their mortgage is, should lead to greater freedom for the consumer in this market.

Bridging loans are usually needed by those using the proceeds from the sale of one home to purchase another.

An estimated 20,000 people trade up to a new home annually. If delays occur between buying one home and selling the other, consumers may need a short-term loan, known as a bridging loan, to tide them over. Mortgage advisers say that such loans are not as common as they once were, given the current buoyant state of the property market. Bank of Ireland estimates that a few hundred customers a month are in need of such a facility and mortgage advisers note that bridging tends to be more prevalent at the higher end of the market, particularly in auction situations.

Often buyers, uncertain of how they will fare at auction, will not have put their own home on the market. If they then find themselves successful at auction, they may have as little as six weeks in which to sell their own home before the purchase of the new property is completed.

There are two main types of bridging loans, open and closed. In the latter case, the consumer has already signed an unconditional contract for a sale and is simply facing a delay in receiving the funds. As a result, the term of these loans tends to be short, often just weeks - though more usually a few months.

Many lenders, including EBS and Bank of Ireland, will only lend funds for closed bridging, steering away from the more high-risk open-ended lending.

For those looking for open bridging, mortgage advisers say Irish Permanent may consider it while AIB will examine it on a case-by-case basis for its own customers.