AIB is to increase the interest rate it charges for new fixed rate mortgages by 0.5%.

The change does not affect those customers who are already on a fixed rate or those on a variable rate.

Over half of the bank's mortgage customers are already on a fixed rate.

The new rates will take effect from close of business today and will apply to AIB, EBS and Haven mortgages.

However, customers with approval who draw down their new mortgage before 14 November will be able to avail of the old fixed rates.

The increase will see a monthly repayment on a new €100,000 AIB five-year green fixed rate mortgage with a loan to value of 50-80% over a 25-year term rise from €431.01 to €455.91.

AIB tracker customers have already had the 1.25% in increases announced by the European Central Bank passed on to them, as required under their contracts.

"As sustainability is a priority for AIB, we continue to offer lower green mortgage fixed rates to customers buying homes with an energy rating of B3 or higher," the bank said in a statement.

The bank also signaled an increase in a deposit rate, after offering low or no returns on savings over the past number of years.

It said that at the end of November it would introduce a one-year fixed term deposit product with an interest rate of 0.25% for customers with deposit balances of greater than €15,000.

AIB, which is the largest mortgage lender in the State, is the first of the five main retail banks in Ireland to hike its fixed or variable rates since the ECB rate increases.

A number of non-bank lenders, including Avant, Finance Ireland and ICS, have already passed the rises on to their customers and it was expected that the main banks would have to eventually follow suit.

Across Europe, most banks have already passed on the rate increases to their customers, but Irish banks had been slow to do so.

Data released by the Central Bank this week showed the average interest rate on new Irish mortgages rose by 0.01% to 2.64% in August.

The equivalent euro area average rate rose by 13 basis points to 2.21% in August - its highest level since at least August 2017 and almost double the rate this time last year.

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Trevor Grant, chairman of the Association of Irish Mortgage Advisors, said moves by lenders to introduce rate increases are to be expected and understandable following the ECB increasing their rates.

He said the 0.5% increase is not as bad as could have been expected and will act as another push that many mortgage holders need to reassess their current mortgage terms.

"It is good to see that AIB, EBS and Haven are allowing applicants who have been loan approved up to four weeks to close out on the mortgage they have applied for," he said.

"This decision is welcome and follows extensive lobbying from mortgage brokers throughout the country when Finance Ireland initially chose not to offer such notice.

"This will enable hundreds of mortgage applicants to close on their new homes or secure a much sought-after mortgage switching deal."