It seemed too good to last and it was. Borrowers who tried to fix their mortgage interest rates in recent days - in advance of a possible increase in European interest rates - found that in many cases they were already too late. Several financial institutions have raised rates on their fixed-interest products. Others say they are monitoring the situation and might follow suit.

The historically low interest rates which accompanied European economic and monetary union and which seemed to many to be the principal benefit of EMU, were bound to rise sooner or later.

Last month, European Central Bank president Wim Duisenberg alluded to a tightening bias in European monetary policy, a signal that any change in interest rates was likely to be upwards. Rates are also moving up elsewhere. The US Federal Reserve, which acts as a sort of benchmark for global interest rate movements, raised its key interest rate on June 30th and is widely expected to raise rates again at its August 24th meeting. Some analysts believe a third US interest-rate hike is possible in October.

The US moves and the hints from Frankfurt led analysts to predict that European - and consequently Irish - interest rates would begin inching upwards either later this year or in the first half of 2000, with obvious implications for variable rate mortgage-holders.

What homeowners and those entering the housing market had not foreseen was the speed with which some Irish mortgage-lenders would raise their fixed rates.

In the last 10 days, EBS, First Active, ICS, AIB, Irish Nationwide and Irish Life Home Loans (ILHL), which distributes its mortgage products through independent brokers rather than direct to the public, all raised their fixed-term rates by amounts ranging from 0.25 percentage points to nearly one percentage point.

Irish Permanent and Bank of Ireland said they were monitoring the situation on a daily and weekly basis.

National Irish Bank, which cut its one-year fixed rates for both new and existing customers two weeks ago, said it had no immediate plans to follow the other institutions and raise rates although it, too, was keeping an eye on market developments.

The reason behind the rise in rates is the increased cost of long-term money, the price that financial institutions must pay on the wholesale markets to borrow money. This is related to long-term eurobond rates.

"Wholesale rates have risen quite sharply in recent months," says Mr Eoin Fahy, senior economist with Ulster Bank Investment Managers. "I wouldn't be surprised to see lenders pass that on [to borrowers]."

According to Mr Christy Flynn, financial controller of AIB Home Mortgages, the rate at which financial institutions can borrow money for a five-year term has jumped in recent weeks from around 3.3 per cent to around 4.8 per cent.

With five-year fixed-rate mortgages varying between 5.0 per cent and 5.99 per cent, the profit margin for many institutions has become razor-thin. However, in the cutthroat Irish mortgage market, many institutions, especially the banks, are reluctant to raise rates, fearing a loss of market share. Some, including Bank of Ireland, NIB, First Active and EBS have even cut their one-year rates or discount variable rates for new buyers, in a bid to gain market share.

The question now facing variable rate mortgage holders and those taking out a new mortgage is whether or not to fix their mortgage, given the global trends in interest rates and the response to date by some Irish lenders. Or, indeed, whether they've already left it too late.

There are pros and cons to fixed and variable rates. With a fixed-rate mortgage, your monthly repayments remain the same for the term regardless of movements in interest rates. If interest rates move up after you locked in, you win. If they fall, you lose. On the down side, severe penalties usually apply if you have to break a fixed-term mortgage for whatever reason - for example, you want to sell your house and buy another, or you have received a lump sum and want to pay off the mortgage early.

The attraction of a variable-rate mortgage is that it is usually cheaper than the fixed-rate option, but you're gambling that rates remain low. Many mortgage lenders say they are reluctant to advise individual customers one way or the other. They remember the high-interest environment of the early 1990s when they advised customers to lock in at what were then competitive fixed rates of 8 per cent and 9 per cent, only to see rates fall substantially in the run-up to EMU and aggrieved customers complain bitterly.

That said, anyone who would have difficulty meeting repayments should interest rates rise significantly, would be well advised to fix. As an indication: a one percentage point rise in interest rates would add nearly £30 a month to a £50,000 mortgage. A larger mortgage and/or a bigger rate increase, would add more to your repayments.

"The fixed rates that are out there are really at the bottom of the cycle," says Mr Shane O'Sullivan, product manager, Bank of Ireland Mortgages. "The advice we'd give is to lock in now. The three to five-year rates of lenders who haven't yet moved represent very good value."

Even where rates have risen, they still represent good value for customers, says Mr Martin Walsh, head of lending at EBS which last week raised all fixed rates except its one-year rate.

Economists tend to agree.

"I would probably fix because interest rates are drifting upwards and you should always fix when rates are going up," says Ulster Bank's Mr Fahy.

"I think people should start fixing," adds Mr Alan McQuaid, chief economist with Bloxham Stockbrokers. "If you wait a month or two, you'll be paying higher rates. But I don't think rates will rise dramatically. You have to remember that rates are still low by what Irish people are used to. In 1992, the rates were 1415 per cent."

If you do decide to fix, cautions Mr Richard Eberle of REA Mortgage Services, get something in writing from your bank or building society about the early repayment penalties. "We are seeing people trying to get out of the fixed rates of a few years ago and the prepayment penalties are horrendous. It's costing them several thousand pounds," he says.

One option to consider, if your lender offers it, is to have part of your mortgage on a fixed rate of interest and part on a variable rate. This helps cushion you against interest rate movements while also allowing early repayments on the principal should you come into some extra money, something not available with standard fixed-rate products.

If you are seeking a new mortgage, you are in a better position. Competition for market share is now so keen that some institutions are offering one-year fixed or discount variable rates as low as 3.75 per cent to 3.99 per cent. The thing to remember is to shop around - and bargain hard with your lender.