New borrowers should stick with variable rate loans at the moment, according to market experts. Variable rates should be on the way down for most borrowers over the coming weeks and this may even be the start of a few interest rate cuts over the course of this year, according to Dr Dan McLaughlin, chief economist at Bank of Ireland.

The European Central Bank has held off on interest rate cuts for far longer than any of its main international counterparts. Both the Bank of England and the US Federal Reserve moved into rate cutting mode before the cautious Europeans, while the Bank of Japan now has zero interest rates.

The European Central Bank, of course, had consistently pointed to increasing inflationary pressures across the euro zone - Ireland was not the only state where inflation exceeded the ECB's 2 per cent limit.

However, price pressures are now falling back, not only in Ireland but in France, Germany and Italy as well. Falling oil prices are helping this process.

There are also increasing signs that economic growth has been slipping back across the euro zone. The European Central Bank does not officially look at, or indeed care about, growth but in the end it has to take its responsibilities as a global citizen seriously. In addition, as ECB president Mr Wim Duisenberg pointed out last week, the "somewhat lower real GDP growth this year will contribute to a reduction in domestic upward price pressures". Overall, it appears that the ECB will not cut rates to the same extent as the Federal Reserve, never mind the Bank of Japan, and as a result, European interest rates are likely to end the year somewhere above 4 per cent.

Nevertheless, this could mean a cut of almost three-quarters of a percentage point from current variable mortgages. For some who are still on their first year of a discounted loan, it could mean that repayments will not jump hugely .

For others, the impact, of course, depends on the size of your loan. For someone on an AIB variable rate, which is among the cheapest on the market, the savings would be about £20 (€25) a month on a £50,000 (€63,487) loan, bringing the payment down to £327 (€415). This assumes that the current variable rate of 5.61 per cent could fall to 4.9 per cent by the end of the year.

Someone on a £75,000 (€95,230) loan over 20 years at AIB's current variable of 5.6 per cent would see their repayments drop from £520 (€660) to £490 (€622) if the variable rate fell to 4.9 per cent. Someone on a £150,000 (€190,460) loan over the same period would see their repayments drop from £1,040 (€1,320) to £981 (€1,245).

However, those who are on Irish Permanent's rate of 6.14 per cent will only see their repayments drop to slightly less than current AIB rates. An Irish Permanent loan of £150,000 (€190,460) now costs about £1,083 (€1,375) and this would fall to £1,023 (€1299) if interest rates dropped to around 4 per cent, and it charged 5.4 per cent.

Opting for a fixed rate in this environment only makes sense if you believe the ECB will not cut interest rates by this much, and the economy is likely to recover enough to force rates back up again in the short term.

However, anyone who would find increased repayments very difficult to live with should consider a fixed rate. The additional repayment you may end up paying is, after all, a form of insurance and it does buy peace of mind. After all, the markets do not always get it right.

All rates were correct at time of going to print.