The lowest rates seen in the Republic are being unveiled today, but they will only be available for a few buyers of expensive apartments in Dublin's Temple Bar area.

First Active will be offering a quarter of a percentage point off its one-year and four-year fixed rates to the buyers of the new apartments.

As a result, rates will be 4 per cent for a one-year loan and 3.74 per cent for the first year of the four-year loan, rising to 4.75 per cent in years two to four.

But those who had been hoping that these rates would spark another round of price reductions in mortgages generally will be disappointed. First Active insists that this is not the start of a move to bring rates down for all its customers.

A spokesman said the new rates are the result of a tendering process and are only available for the buyers of the first phase of the apartments on Pudding Row.

"These will not be available to our other customers and are the result simply of a tendering process which we were asked to compete in. We had to be very competitive to win that tender," he said.

It will have to tender again for the second and third phases of the development, which have not yet come on stream.

"These are high ticket mortgages with a very good clientele."

Apart from the low rates, buyers will get a free indemnity bond, a free valuation, a three-month break from mortgage repayments and home and contents insurance, as well as loans up to 92 per cent of the purchase price.

First Active is hoping to get the mortgages for all 40 apartments, which are are likely to be bought mainly by first-time buyers - owner-occupiers are being given priority. It is also expecting the average mortgage to be at least £150,000.

The spokesman added that it will be using its 45 per cent net income criteria when deciding how much to lend to borrowers, despite a recent Central Bank warning on the issue. That means that it will lend an amount where the repayment takes up 45 per cent of a person's net income. As a result, a borrower would need an after tax income of £2,060 to afford the approximately £920 monthly repayment on a £150,000 loan.

Other lenders also insist that this is not the sort of competition which will lead to a general decline in rates. They say First Active is not in the top four mortgage lenders which account for about 75 per cent of business. You would need EBS, Bank of Ireland, Irish Permanent or AIB, to institute cuts of this sort to see a general market reaction, one source said.

But, according to First Active, it could be the start of so-called "differential pricing". The spokesman said it currently has a blanket pricing policy for the mass market where all borrowers can avail of the same interest rates. But this may change, he added.

As mortgages begin to be sold over the Internet and direct telephone-based lenders enter the market, there will have to be a reaction. "We could end up with different prices depending on whether the mortgage was accessed over the telephone, the Internet, through a branch or a mobile salesforce."

Some observers expect either UK or continental lenders to look at entering the Irish market over the next couple of years. Irish lenders have the highest margin, or biggest difference between where they access funds and where they lend the amount and that would be attractive for other lenders who are used to much tighter margins.

This week, Bank of Ireland admitted that it is making less money from its UK mortgage lending business than its Irish business because of the much tighter margins in operation.

But despite the low rates, it is important for prospective borrowers to look at the variable rate they are likely to end up paying. First Active's current variable rate is 5.25 per cent. This compares with 4.85 per cent from EBS, 4.99 per cent from ACC and 5.05 per cent from Ulster Bank.