AIB mortgage holders are facing a significant hike in repayments -- as they join other taxpayers in providing billions to bail out the banking sector.
As all eyes focus on Finance Minister Brian Lenihan's "once-and-for-all" solution for the banks to be revealed in the Dail this evening, AIB confirmed that it would increase mortgage interest rates by 0.5pc before the end of the year.
And it is understood that Ireland's biggest bank has plans to push standard variable and fixed rates up by as much as 1.5pc by December in a bid to return to profitability.
Mr Lenihan today briefed the Cabinet on his strategy to change the banking sector before announcing the plan in the Dail.
The Finance Minister is preparing to outline plans to take control of as much as 70pc of AIB and 40pc of Bank of Ireland.
Two of the country's building societies, EBS and Irish Nationwide are also likely to be entirely nationalised as part of the rescue package.
The financial institutions could be provided with as much as €20bn in recapitalisation.
The Government currently has a 16pc stake in BoI, a 25pc indirect stake in AIB and full ownership of Anglo, after pumping €11bn into the three banks last year.
Before Mr Lenihan's speech in the Dail, toxic loans agency, National Asset Management Agency (NAMA) will detail the discounts on the first loans.
For the first time, the public will learn how much the banks' toxic loans are actually worth.
Discounts or 'haircuts' on these loans will range from 35pc to 60pc which means that NAMA will pay the banks up to 60pc less than they value the loans themselves
Meanwhile the Financial Regulator will outline how much money banks will need to set aside for bad loans, which will shed more light on how much new capital the lenders will need.
Mr Lenihan said it was time to sort out the banking sector "once and for all so that it can support economic recovery".
It is expected that the Government will put money into Anglo Irish Bank and Irish Nationwide by using IOUs rather than hard cash and will instead invest the money over a 10-year period, rather than upfront.
Analysts have said that mortgage holders in the other financial institutions will face further increases in mortgage rates.
It is reported that Bank of Ireland mortgage holders can expect an increase in standard variable rates by 0.5pc within two weeks.
Shares in AIB and Bank of Ireland fell sharply yesterday amid reports that the Government was preparing to take control of a much bigger portion of the financial sector than initially planned.
AIB shares closed down 19.6pc, while Bank of Ireland shares fell 10.4pc.