AIB has said it will increase its fixed rate mortgages, becoming the latest lender to hike its rates in the past few months.

The bank blamed the cost of mortgage financing for the move.

The changes, which will affect new business for owner occupiers and buy to let borrowers, will come into effect from the close of business today.

The bank said its one-year fixed rate mortgages for owner occupiers would rise from 3.59 per cent to 4.15 per cent, while a similar mortgage for buy-to-let investors will rise to 5.15 per cent from 4.59 per cent.

Owner occupiers seeking a three-year fixed rate mortgage will now pay 4.88 per cent in interest instead of 3.89 per cent, while investors will be charged 5.88 per cent, almost 1 per cent higher.

Five-year fixed mortgage rates will cost residential customers 5.35 per cent and investors will pay 6.35 per cent.

AIB has followed Irish Life & Permanent, Ulster Bank, EBS and KBC Bank on altering mortgage packages.

Permanent TSB in February announced it would increase its two-year fixed term rate from 5.25 per cent to 7.25 per cent, and its five-year fixed rate would increase to 8.75 per cent. The move, which the bank said was only for a limited time, came after the bank increased its variable interest rates by 1 per cent. A day after Permanent TSB's original announcement, Ulster Bank also hiked its variable rates.

In recent weeks, EBS Building Society has upped its variable rates, adding 0.6 per cent, and said it was withdrawing all offers of fixed-rate mortgage packages for new and existing customers. It was soon followed by KBC, which said it was raising interest rates on some of its variable rate mortgage products and also withdrawing some fixed interest products.

Independent mortgage and insurance broker group PIBA said AIB's rate hike was likely to be the latest in an upward cycle that could last for a number of years.

"Unfortunately for mortgage holders we are now seeing the end of the low interest rate era," Rachel Doyle, director of PIBA Mortgage Services said.

"Non-tracker mortgage holders who have not already fixed need to review their situation urgently. However, we would consider that fixing for short periods of a few years would be unwise."

Homeowners are also facing a rate hike from the European Central Bank, which has indicated it may begin increasing rates soon.