Even though interest rates have jumped by a full 1% since last December, some of the biggest banks have held back part of the pain by squeezing their own margins.

They are betting that by giving a little they can continue to buy our loyalty.

Permanent TSB made the running early on, pulling back some of the interest hikes that happened in December and March, although it has hit customers with all of the subsequent rate rises in June and again at the beginning of this month.

Bank of Ireland has played things slightly differently, holding back in December, passing on the full increases in March and June, but then pulling back on the most recent rate hike.

Between them, Permanent TSB and Bank of Ireland have almost as many mortgages on their books as all other lenders put together, many of them stuck on standard variable rates (SVRs).

By swallowing some of the rate rises themselves, the two banks have been able to jump up the mortgage tables so that, instead of having the dearest standard variable rates on the market, they are now among the cheapest (see table below right).

Their apparent generosity will undoubtedly be welcomed by home owners feeling the pinch of higher loan rates. But it is too little too late. Anybody still stuck on a standard variable rate needs to take urgent action because there are much better options out there.

"There's no sense in anyone being on a standard variable rate, " says Ronan Mackay of NC Mortgage Brokers. "If you're going to stay on a variable rate, at least go for a tracker mortgage. With a standard variable rate, you're paying over the odds no matter who your lender is."

With more interest rate hikes in the pipeline, a fixed rate mortgage is probably top of the shopping list for anybody thinking about moving off an SVR. Fixed rates are attractive at the moment, with lenders charging only a slight premium over SVR for the peace of mind of knowing what your repayments will be over the next few years.

IIB Homeloans, for example, will fix your mortgage at 4.59% for two years, 4.79% for three years or 4.89% for three years. These rates are only fractionally higher than IIB's SVR of 4.45% and will insulate you completely from the interest rate rises that most experts are predicting before the end of the year.

But all that peace of mind comes at a price. According to Mackay: "First-time buyers are especially loathe to fix for five years because, no matter how good the rates, they probably expect to move on to bigger and better things before the five years are up.

The trouble with locking yourself into a fixed rate is that you will be hit with redemption penalties if you need to break out early."

For many home owners the future is just too uncertain to run this risk, especially as redemption penalties can amount to six months interest on your mortgage.

"Fixed-rate mortgages are attractive if you can be sure you won't have to move house before the fixed period is up, " according to Frank Conway, marketing manager at broker Irish Mortgage Corporation.

"If it's peace of mind you want, I'd advise you to go fixed. But if it's value for money, try a tracker mortgage instead."

Fixed rates can be just too inflexible, especially when even the best laid plans can go wrong, according to Mackay.

"Even if your finances are really tight, so that you would suffer if interest rates rise again, I'd advise you to look at fixing for no more than three years, " he says. "Anything can happen over a longer term, such as five years. If you buy as a couple, there's always the risk that you could split up and have to sell the house. Remember that the earlier you break out of a fixed-rate mortgage, the bigger the penalty is going to be."

It is possible, however, to mix and match, combining the flexibility of variable rates with the security that comes with a fixed mortgage.

"This is what I've done with my own mortgage by putting half on a tracker and fixing the other half, " says Mackay.

"The tracker part is cheaper at the moment, but it all depends on what way interest rates will move over the coming years."

And then there is the compromise option. IIB Homeloans offers a three-year capped tracker rate: borrowers are guaranteed to pay no more than 4.99%, whatever happens to base rate.

The underlying cost of the deal is base rate plus 1.25%, so borrowers' repayments will be frozen if and when rates reach 3.75%. The deal offers certainty about the size of your repayments, plus a chance of benefiting from future base rate cuts.

SWITCH, SAVE AND RAVE

DAN RAVE (27) and Karen Barcoe (28) took action when the 12-month discount ran out on the First Active mortgage they used to buy their "rst home in Clondalkin, south Dublin.

They have taken advantage of the home mover package from Bank of Scotland (Ireland), which gives them discounts for a further two years, followed by a low-cost tracker rate over the remaining life of the loan. The switch has knocked 10 years off the mortgage, allowed them release 15,000 to pay off expensive short-term borrowing, and should save as much as 90,000 in interest over the life of the loan.

Dave, a traf"c controller on Dublin's Luas light rail system, says the switch has also cut the couple's monthly debt repayments. "We started off with a 40-year mortgage from First Active because it was the only way we could get into the market, " he says. "When it's your "rst mortgage, you take whatever you can get. By switching we should be able to get the monkey off our backs 10 years earlier."

Bank of Scotland's deepest discounts are available to people borrowing less than 75% of the value of their homes. Even though Dan and Karen have only been home owners for 12 months, and had topped up their mortgage along the way, rising property values still allowed them stay under the 75% limit.

From this Friday, when the latest interest rate rise takes effect, the introductory rate will go to 3.45%, valid for the "rst two years, followed by the base rate plus a margin of 1% (currently equivalent to a 4% rate of interest) for the rest of the mortgage.