AIB has announced it is to cut mortgage interest rates on both occupier and buy-to-let mortgages.

Bowing to pressure AIB Group has announced that it is cutting rates by 0.25% for AIB Standard Variable Rate customers and 0.38% for EBS and Haven standard variable rate customers.

High standard variable rates of about 4.5% being charged by Irish banks, while ECB rates are at almost 0%, have been criticised by the Government and consumer advocate groups.

Earlier this week at the group's annual general meeting, Chairman Richard Pym hinted that cuts to mortgage interest rates were being considered.

That came as shareholders criticised AIB for "milking their customers" as the bank returns to profit.

At the time Mr Pym said AIB, as a commercial institution, needed to make sure that lending is at sustainable rates to see that it is able to rebuild its capital to insulate it against any future adverse shocks.

Today's cut is AIB's second reduction in mortgage interest rates in six months, reflecting the bank's improved financial performance. 

The Taoiseach has welcomed the decision by AIB to lower variable interest rates for mortgage holders.

Enda Kenny said it was a small but important step, which he hoped would be followed by other banks.

He said he wanted to see the banks go further and reduce rates by a greater percentage and said it was not fair that banks could borrow money at very low rates but were charging customers significantly more.

Mr Kenny called on all financial institutions to understand the "realism" that variable rates should fall.