BAILED-OUT AIB is to hit 70,000 customers with a second rise in mortgage costs in just three months. Owner-occupiers will have their standard variable mortgage cost increased from 3.5pc to 4pc.
The increase, due in November, follows a similar 0.5pc rise in September. This means the bank's variable rate has jumped by 1pc in just three months.
It will add another €60 to the monthly repayments for a family with a typical €200,000 mortgage.
Over a full year, the combination of increases will suck an additional €1,440 out of the household budget for those with a €200,000 mortgage.
The bank, which has been given €21.5bn from the State, said its variable rate would still be the lowest in the market.
Around 70,000 homeowners will be hit by the latest rise in the variable rate.
The move comes despite the European Central Bank cutting its key lending rate to banks in July. It was the third time the ECB had recently cut rates.
AIB is pushing up standard variable rates and loan-to-value rates for owner-occupiers by 0.5pc from Tuesday, November 13, with buy-to-let rates going up by the same amount.
Tracker rates will be unaffected.
Mortgage experts said yesterday the move would push up arrears.
Almost one in 10 of the bank's residential mortgages are three months or more behind in their payments.
AIB chief executive David Duffy said: "We are acutely aware of the financial impact that any increase will have on our customers.
"But this decision is essential in order to return AIB to a sustainable operating model and is part of a transformation of the bank's operating base.
"AIB does not have an option of continuing to provide mortgages on a loss-making basis at pricing materially below our market competitors, as is currently the case. To do so would only see further erosion of the capital provided to the bank by the State."
The bank claimed its variable rate will go to 4pc, while the average across the market is 4.4pc. Bank of Ireland is also set to hike its variable rate by 0.5pc next month.
The rise affects all customers with Bank of Ireland and ICS who have variable rate mortgages.
A spokeswoman for the Department of Finance said it had been informed in advance by AIB about the rate rise.
The spokesman said mortgage rates were a "commercial decision" for banks, even though they were bailed out by the State and AIB had been pressurised to cut rates when the Government came to power.
But since then a relationship framework had been signed with the domestic banks.
"We now don't get involved in day-to-day banking. The Government would have no role in it," he said.