Bank of Scotland's entry to the Irish mortgage market signals the start of a price war, according to Goodbody Stockbrokers. But its eventual impact will depend on how well the strategy is executed, the broker says.

Should the strategy prove successful, it could lead to a reduction of as much as one and a quarter percentage points in the market-wide standard variable rate, analyst Mr Oliver O'Shea says.

Among the publicly-quoted companies, having to reprice all of their variable rate mortgages would affect Irish Permanent and First Active most significantly, resulting in a reduction in pre-tax profits of 29 per cent and 34 per cent respectively.

But the overall affect on Irish Life & Permanent would be diluted by Irish Life's earnings, resulting in just an 8 per cent drop in group profits.

The two major banks would be least affected with AIB profits dropping by just 2 per cent and Bank of Ireland's profits down by 3 per cent in the event that they were forced to slash variable rates.

Goodbody believes Bank of Scotland represents a formidable force.