This has been a great week for mortgage holders. Interest rates on mortgages are now at lows that would have not seemed possible five years ago.

The combination of joining the euro zone - which has driven Irish rates to historical lows - and the arrival of competition from the UK, means very significant savings for mortgage holders. Importantly, while savers have not been doing so well, the latest round of rate cuts on borrowing have not been met on the other side.

Anybody with a variable rate loan with a lender that has cut its rates will see the benefit quickly and most reductions should come though by October. Customers of the big banks have already benefited.

What happens now will be very important for the future of mortgage lending. One of the reasons the banks moved down to 3.99 per cent and 3.95 per cent was an attempt to neutralise Bank of Scotland. So far, it says it is committed to staying in the market here which is good news for consumers.

The Scottish bank's figures for the first two weeks of operations here were higher than many had expected. However, whether it can keep up the momentum given that similar rates can now be accessed through Irish institutions remains to be seen.

Some worry that rates may start to increase quickly next year, particularly if Bank of Scotland bows out.

The worry is that the banks will use the opportunity of rising interest rates next year to give all of the increase to customers. When interest rates fell, the banks only passed on a small amount of the benefits to customers.

However, with significant differences now opened up between variable and fixed rates, the appeal of fixing is losing some of its lustre.

For example Bank of Ireland's two-year fix is 5.15 per cent. That equates to a £667 repayment for a £100,000 mortgage taken out over 20 years. Its new variable rate equates to repayments of £603 for the same loan. That is a hefty insurance premium for only two years.

The repayment for that loan with a five-year fix would be £714 a month, an additional payment of some £111 a month or £1,332 a year if rates stay as low as they are. Of course, anyone who has settled for a fixed-rate loan in recent years or months may be regretting it. Many people have taken out fixed rates in recent months, believing that interest rates were on the way back up. That is still the most likely course and most analysts are still predicting that the European Central Bank will raise rates later this year, or early next year.

However, what these calculations did not take into account was the Bank of Scotland's entry into the market and a full-scale mortgage lending price war.

Current fixed rates are still low by historical standards and do provide piece of mind. That can be very important if you have a particularly large mortgage or simply could not afford a rise in rates. Rates of under 6 per cent for five years are still available, while 10year fixes are still under 7 per cent. For many who locked in at the time of the currency crisis, these still appear appealingly low.

BUT you have to remember that it is very expensive to break a fixed-rate contract. How expensive depends on the individual lender. Different institutions take various approaches to those who decide to break their fixed-rate contracts. Some get customers to pay a number of months' interest - typically three to six months' payments - while others opt for what is known as a yield maintenance formula, where they charge borrowers for the cost they face in honouring the fixed-term contract.

Some institutions also take a more lenient approach to borrowers who break a contract because they choose to sell their property, as long as they take out the new mortgage with the same institution. EBS, for example, does not penalise borrowers who do this. It is likely that borrowers on a yield maintenance formula may get better news than those whose contracts stipulate a number of months' interest payments.