AIB is to increase its variable mortgage rates by 0.5% to 4% from Tuesday, 13 November.

The announcement of the second rate rise in as many months comes just two days after the bank repaid €1 billion to senior unsecured bondholders.

The move to hike mortgage interest rates will affect one in five mortgage customers at the bank.

This will mean another €30 being added to the monthly repayments for every €100,000 borrowed.

The bank said it was putting the rates up as its mortgage book is loss-making and it needs to return to sustainability.

AIB is nearly wholly-owned by the State, having received funds to date amounting to €21bn.

Almost one in ten holders of the bank's residential mortgages is three months or more behind in their payments.

Chief Executive David Duffy said the bank is "acutely" aware of the financial impact that any increase will have on its customers, but said that the move is needed to transform its operating base.

Bank of Ireland and ICS customers were told last month that their variable rate mortgages would also increase by 0.5% from 24 October.