The AIB has announced an increase in the interest it charges on variable mortgages to upto 4 per cent from 3.5 per cent in November.

This is the second time in three months that the bank has increased its variable mortgages rates. According to estimates, the hike will affect about one in every four mortgage payment with the bank. The data showed that the hike would mean an additional €30 per month on every €100,000 borrowed.

The bank said that the hike is necessary as its mortgage book is making losses and it is aiming to turnaround the segment in order to make it sustainable. The bank is currently almost completely owned by the state as it has already received funds to the tune of about €21 billion.

AIB chief executive David Duffy said that the he understands that the hike will have an impact on the customers of the bank but also said that it was required to turnaround its operations and make them sustainable.

He said. "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."