With official interest rates expected to fall by 0.25 percentage points next week and drop even lower in coming months, borrowers on variable-rate loans will get some relief. But what should borrowers coming off fixed-rate loans do? Should they jump into another fixed-rate loan or switch to variable?

"Consumers may as well ride the market down now," says Steven Anderson, the head of research at financial comparison website InfoChoice.

That is because three-year fixed rates are about 9 per cent - the same as most people pay for their their variable-rate home loans. Generally, as variable rates fall, so do fixed rates, unless economic conditions change.

Analysts are anticipating a 0.25 percentage-point cut next week followed by a further cut of 0.25 percentage points in October and possibly more. For those mortgaged up to their eyeballs who want to insure against higher repayments, there are more cheaply priced fixed-rate loans, such as non-bank lender RESI's three-year fixed rate of 8.52 per cent and HSBC's three-year fixed rate (available to new customers only) of 7.99 per cent.

Variable rate mortgages are priced off the cash rate or official interest rates set by the Reserve Bank. Fixed rates, on the other hand, normally move in line with where analysts expect interest rates to go in the future. When the economic outlook turns gloomy, market rates generally fall and so do fixed-interest loans.

However, another factor has been introduced into the market - shrinking competition. Non-bank lenders have been hit hard by the credit crisis, driving their borrowing costs higher. This has reduced competition, to the benefit of the big banks, which have been able to fatten their profit margins.

The Aussies, RAMS and Wizards of this world, who put the banks under pressure, are less competitive, says Warren O'Rourke, national manager of corporate affairs at mortgage broker Mortgage Choice. "We have a new landscape - and one we have probably not seen since the early '90s."

InfoChoice's Anderson says one year ago the banks' margins (variable-rate interest rate minus the 90-day bank bill rate) were less than 1.5 percentage points but now are more than 2 percentage points.

In the absence of strong competition from non-bank lenders, O'Rourke says, the most likely source now comes from the international banks operating in Australia.

Consumers looking for a better deal on their mortgage could look at what is available from ING, BankWest (owned by British bank HBOS), Citigroup and HSBC.

The view on the economy and interest rates can change quickly. It was only a few weeks ago that financial markets were pencilling steady or rising rates into their economic forecasts because of low unemployment and inflation fears. But the economy has softened since then and predicting rates is not an exact science. There's always a possibility that official interest rates could remain on hold or could increase, further down the track.

"If the consumer can afford to take the losses associated with any possible interest rate increases, then variable rate mortgages are the better bet for those who expect rates to fall in the near future," says Frank Lopez, a financial analyst with research firm Cannex. "However, if a consumer's financial constraints require absolute certainty that their mortgage costs won't increase, then fix the mortgage. And for those not sure what to do - they can go for a split mortgage, fixing part of your mortgage and going variable on the remainder."

Lisa Montgomery, head consumer adviser at RESI, says many borrowers coming out of fixed rate terms at the big banks are reverting to their existing bank's standard variable mortgage rate of about 9.6 per cent.

But anyone with a mortgage of more than $250,000 should be able to negotiate a discount on the standard interest rate of up to 0.7 percentage points.

Montgomery says such borrowers should approach their existing lenders to get a discount "because the easiest and cheapest way is to talk to your lender first before going anywhere else."

She says borrowers who can't afford to risk higher repayments may want to consider a one-year fixed rate loan. By this time next year, variable and fixed rates may be lower.

Some fixed-rate loans are flexible and allow the borrower to make extra repayments, so it's worth checking the terms and conditions of the loan.

But if you need to break the loan for any reason - for example, you may want to sell the home to move elsewhere - there maybe high costs involved.