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Allied Irish Banks (AIB) is to refund almost €400,000 to over 400 tracker mortgage customers who were overcharged.

In a statement this morning AIB confirmed it is refunding €395,000, which includes interest, and apologised for its error.

A total of 436 mortgage accounts were overcharged. The average customer refund is €906.

AIB said it provides varying tracker rates to mortgage holders depending on the loan to value ratio of their mortgage.

"The error arose when customers were charged an interest rate that did not correspond to the loan to value ratio for their account. Additionally, in some instances a 'new business' discount was not appropriately applied,” the bank said.

It is not clear over what period the overcharging occurred. The Financial Regulator has been informed of the issue.