EBS Building Society has become the latest financial institution to respond to the recent fall in official euro interest rates, cutting its lending rates while maintaining its rates for savers.

The mutual building society announced a quarter of a percentage point reduction in its variable mortgage rate yesterday to 4.85 per cent, the lowest in the market and the first time a standard variable rate has fallen below 5 per cent.

New variable rate customers will benefit by a further quarter point reduction and will qualify for a rate of 4.6 per cent in the first year.

The cut takes effect for new customers from the start of business today and for existing customers in accordance with the terms of their contracts.

"In making these changes, we are responding in a balanced way to the needs of both our borrowers and savers," EBS head of lending, Mr Martin Walsh, said.

"The current round of rate cuts has been good news for borrowers. However, we believe that rates for savers must be maintained. Many thousands of our savers, particularly the elderly, depend on their savings for both security and income."

Irish Permanent and Bank of Ireland have already cut rates in the wake of the decision by the European Central Bank (ECB) to reduce official rates by half a percentage point nearly a fortnight ago.

Irish Permanent's variable rate is now 5.25 per cent while Bank of Ireland's stands at 5.24 per cent. Neither institution cut deposit rates.

Most of the other lending institutions have said that they are monitoring the situation but have yet to announce rate reductions.