AIB is to increase its variable interest rate for mortgage holders by 0.5 percentage points from close of business today.
The bank is also increasing its fixed mortgage rates. Tracker rates will not change. The standard variable rate for owner occupiers goes up from 2.25% to 2.75% (APR 2.79%).
AIB said the cost of money on the international markets remained high, and it was not sustainable for the bank to continue to provide mortgage at rates that were below those it was paying to borrow money.
Earlier this month, when the bank released its financial results, its managing director Colm Doherty signalled that mortgage rates would have to rise, describing the current retail banking environment in Ireland as 'quite dysfunctional'.
Earlier this year, AIB told brokers that it would no longer facilitate those wanting to switch their mortgages from another financial institution.
'We understand the financial pressures faced by many existing and prospective home owners and we will make every effort to keep rate increases to a minimum,' said AIB general manager of product development Michael Crowley.
AIB currently has €27 billion worth of mortgage loans, with 64% of its mortgage customers owner occupiers.
60% of AIB mortgages are trackers, 30% standard variable and 10% fixed rates. The standard variable rate increase amounts to €25.88 per month per €100,000 borrowings over 30 years.
