BORROWERS can look forward to lower home loans, but savers returns will be cut further following interest rate cuts from Irish Permanent and Irish Life Homeloans.

Irish Permanent, which has one in five of all home loans, and Irish Life announced they are cutting a quarter point off variable mortgage rates.

The cuts result from the reduction in official rates by the Central Bank. The position of savers however, will further worsen.

Most of the major financial institutions have indicated they will be reducing interest rates early next week. AIB, Bank of Ireland and EBS all said they will be announcing cuts, probably on Monday.

The Central Bank cut its key short term facility (ST) by a quarter point to 6.25 per cent yesterday in response to a half point cut from the Bundesbank on Thursday.

Mr Dermot O'Brien, economist at NCB Stockbrokers, said the Central Bank was reluctant to follow the Bundesbank cut in full because off the difference in growth rates between the two countries.

"After all, the Irish economy is doing very well," he noted. Dame Street is also concerned about inflation picking up. However it was felt that not to have moved would have sent out the wrong signal, that it felt inflation was a real worry, he added.

The cut, combined with a fall on wholesale money markets, has left lenders with room to trim rates for borrowers. The significant one month rate has been trading at around 5 per cent for the past two days. This is seen as the key level allowing lenders to cut rates.

Permanent's new variable rate for borrowers is now 6.75 per cent, reducing the cost of a 20 year £50,000 mortgage by £7.50 a month. Irish Life's new standard, variable rate is 6.69 per cent. The company has also cut its fixed rates for new borrowers. Existing borrowers will have to wait until next week to find out if they will receive any cuts.

Ulster Bank was first off the mark on Thursday. However, savers suffered cuts of up to half a point.

Three month savings rates fell a half point to 2.5 per cent on balances below 10,000 to 4.5 per cent on balances between £25,000 and £50,000. Instant access rates for Ulster's ATM based savings accounts fell by a quarter point to 0.25 cent on balances under £500 - while amounts over £10,000 now attract a half point less at 1 per cent.

The 0.25 per cent payable on the ordinary passbook based savings account remains the same for savings of less than £5,000 while amounts over £100,000 now attract interest of 1.5 per cent, down a half point.

Irish Permanent and Irish Life have not yet decided exactly what rates will be offered to savers. But a spokesman for Permanent confirmed that cuts are "likely to be of the order of a quarter point."

A spokesman for AIB confirmed that the bank would be cutting rates by up to half a point on Monday while savers are also likely to be affected. Bank of Ireland also confirmed it will be reducing rates by between 0.25 and 0.5 points. EBS said it will be cutting "by at least a quarter" early in the week. All are likely to lower rates for savers in the process.

First National and Nationwide will both be meeting on Tuesday to decide on their strategy. But it is extremely unlikely that either can hold out, given the competitive pressures in the home loan market.

Mr Michael Fingleton, chief executive of Nationwide, insisted that the society will "hold on to our depositors in the best way we can".

National Irish Bank and TSB which trimmed their rates in February in anticipation of the Bundesbank's latest cut, are not expected to introduce further across the board cuts. TSB is likely to target existing borrowers with a new range of fixed rates.

Mr Philip Halpin, economist at National Irish, said the bank had "taken all the action it needed to" with a half point cut in February. We took an aggressive stance then which exceeds what our competitors have done in the last days," he insisted.

The Minister for Finance, Mr Quinn, welcomed the Central Bank's decision to cut the official rates. Mr Quinn said Ireland is "well placed to take advantage of the move to a lower level of European interest rates because of our low inflation and the stability of our economy.

But Mr Peter Faulkner, of IREX, the Irish Exporters' Group, called for a dual interest rate system, one applying to indigenous industry and a higher rate for consumers. "When will the Government recognise that Germany is pursuing a policy of competitive devaluation which it states is unacceptable?" Mr Faulkner asked.