AIB to raise mortgage rates by 0.5% next month

Struggling mortgage holders are to be dealt a blow in the run-up to Christmas, with AIB set to increase its mortgage rate next month.

Tens of thousands of homeowners will see their mortgage repayment rate rise by 0.5% to 4%, with buy-to-let customers facing a 4.95% interest rate after the 0.5% increase.

The rise means additional payments of €60 a month for a homeowner with a €200,000 mortgage.

Every 0.25% rate increase pushes up the monthly cost of repaying each €100,000 borrowed by about €15.

A family with a €300,000 AIB mortgage faces paying an extra €90 a month from Nov 13. Over a full year, it will cost an extra €1,080.

About 20% of AIB’s mortgage customers will be affected. The bank said “the decision to raise its variable rate is driven by the continuing need to return the bank to sustainability and the fact that AIB’s mortgage portfolios continue to be loss making”.

Chief executive Donal Duffy said: “AIB does not have an option of continuing to provide mortgages on a loss-making basis at pricing below our market competitors.

“To do so would only see further erosion of the capital provided to the bank by the State.”