AIB and Irish Permanent have become the first lending institutionsto respond to last week's increase in official euro interest rates.

Irish Permanent, the State's largest mortgage lender, plans to raise its home loan variable interest rate by a quarter of a percentage point to 4.89 per cent, while AIB's variable mortgage rate will go up by 0.3 of a percentage pointto 4.29 per cent.

The increases follow last week's decision by the European Central Bank (ECB) to raise rates by a quarter of a percentage point, the second such rise in as manymonths. Irish Permanent's rate rise will be effective from April 1st. The quarter-point increase means repayments on a £50,000 mortgage taken out over 20 years will increase by £6.83 per month to £326.94, from £320.11.

Meanwhile, AIB, which has not had a general round of interest rate changes since last April, is increasing loan and deposit rates with effect from the close of business on March 27th. The bank announced increases of between 0.25 per cent and 0.4 per cent in its various lending rates but will not increase the AAoverdraft rate, the key working capital facility for farmers and small businesses.

Irish Permanent has also increased deposit rates for certain longer-notice accounts.