Current variable mortgage rates should have significantly further to fall, even after last week's latest rate cut from the Central Bank.

Official inter-bank rates are now around 3.69 per cent. Normally, rates as low as this would point to a variable rate mortgage of just over 5 per cent up to about 5.5 per cent. And with inter-bank rates almost certainly due to come down to 3.3 per cent in a matter of weeks, borrowers could be forgiven for expecting rates as low as 4.8 per cent.

But, so far at least, it appears they are going to be disappointed. Irish Permanent was again the first to cut its rates following the Central Bank's announcement last Friday. But it only brought variable mortgage rates down to 6 per cent, taking a massive margin of almost 2.5 percentage points. An Irish Permanent spokesman said the bank has to ensure an equitable distribution across all products, both loans and savings.

The Irish Permanent's margins are significantly higher than any lender has been able to take since real competition entered the market. And borrowers should now wait to see if the other lenders follow suit or if they decide to give better value to borrowers.

Of course, one reason that lending rates may not now fall as quickly as usual is that rates for savers cannot fall much further. The problem for the lenders is how low can they cut savings rates before savers start to panic. But most of the institutions say that savers with over £10,000 on deposit and few transactions are still likely to get reasonable returns.

The lenders say they have to keep some margin for savers who would otherwise desert - but few banks and building societies are actually passing on the benefits to savers. Irish Permanent, for example, also cut deposit rates last week and it is likely the other lenders will follow suit.

On top of that it is only the mutual societies, including EBS and Irish Nationwide, who do not have shareholders interests' to worry about and almost consistently offer the best value to savers. According to Irish Nationwide managing director Michael Fingle ton, variable rates will come to 5.5 per cent. But he said maintaining rates for savers is difficult but that societies, particularly mutuals, have to pay up. Mutuals must maintain a 50 per cent funding rate from savings.

Other lenders, such as Irish Life Homeloans, have more freedom again. These institutions, or centralised lenders as they are sometimes known, do not have a relationship between borrowers and savers to maintain. They operate solely from funding from the money markets and could be expected to pass on all the benefits of the cut in the inter-bank rate.

An Irish Life spokesman said it would not be entering into any price war. He added that the lender took a hit in the early part of this year when inter-bank rates rose but mortgage rates held stable and that the extra margin now is making up for that.

However, the maximum margin Irish Life operated under during the year was around 1.24 percentage points. If it now had a variable rate of 6 per cent, the margin would grow to 2.31 points.

Certainly when rates were moving in the opposite direction at the time of the currency crisis, many borrowers with these institutions felt the pain as all the rate hikes were passed on to a greater extent than they were by the banks and building societies.

But in the new low interest rate environment, it is these lenders who are giving many of the societies here most pause for thought. At the moment, for example, Irish Life could easily offer loans below 5 per cent, although borrowers would have to be prepared for more volatility if rates were to begin to rise again.

But it is the possibility that the very efficient UK centralised lenders will enter the market after the UK has entered the single currency that is most exercising the minds of Irish lenders. Even the entry of a single, large UK lender, such as Halifax, could have significant repercussions and it may mean the end of the high margins which Irish lenders have enjoyed.

While many lenders have still to announce new rates, existing borrowers can expect to see the benefits of the lower rates passed on from December 1st and none should lose out. And new borrowers should hold off as long as possible as variable rates well below 6 per cent will almost certainly be on offer very soon.