AIB has increased its standard variable mortgage rate from 4.99 per cent to 5.61 per cent, after delaying an increase since June. Irish lenders have been pushing up their rates steadily for the past 12 months in response to seven successive interest rate rises from the European Central Bank. The variable rate move by AIB means the monthly repayments on a £100,000 mortgage over 20 years will increase by £34.36 to £692.64. AIB still offers one of the cheapest rates in the market, apart from Bank of Scotland, which is the best value at 5.29 per cent.

This latest increase is the fourth by AIB in 12 months. A spokesman for the bank said it had not passed on the last two ECB increases to its customers but it had now reached the point where it had to get back in line. The rest of the market has yet to react to the most recent interest rate increase from the ECB on October 6th to 4.75 per cent, which means mortgage holders across the board are in line for another variable rate increase in the near future.

A look back at where variable rates stood 12 months ago shows just how stark the effect of cumulative increases has been. The market range in October 1999 was between 3.85 and 4.25 per cent. Today most financial institutions are offering variable rates of between 5.29 and 5.89 per cent. In terms of the cost to the mortgage holder, taking an average rate from this year and last year, monthly repayments on a £100,000 mortgage over 20 years have increased by £84.37.