Substantial savings if rate sticks

Bank of Scotland's 3.99 per cent mortgage would, if sustained, yield substantially lower monthly repayments for borrowers.

At that rate, a borrower taking out a £50,000 mortgage over 20 years would make monthly repayments of £302.50.

This compares with monthly repayment of £326 on the same mortgage from the EBS, which currently offers the lowest standard variable rate of interest.

For anyone thinking about switching their mortgage, the low rate would also afford customers the opportunity of realising greater savings if they were keen to pay down their mortgage before the full term.

Mortgage holders could opt for the lower rate but hold their repayments at current levels and reduce the term and amount of interest due on the loan.

The key judgment which borrowers must make is whether Bank of Scotland's variable rate will remain below that of other borrowers. As it is a variable rate, the bank can change it at any time.

Bank of Scotland says that it can maintain a lower profit margin on its loans than the Irish institutions are now doing.

It says that it can offer mortgages at an interest rate 1.5 per cent above the cost it pays for raising the funds, compared to the 2.5 per cent or higher margin typical in the Irish market.

Whether it can sustain such a margin and what the response of the Irish borrowers will be is the key question for the Irish mortgage market and its customers.