Mortgage rates are on the rise, with Irish Permanent and Bank of Scotland raising rates from next month.

The institutions are increasing the variable mortgage rate by 0.25 of a percentage point in line with the increase in European Central Bank (ECB) rates earlier this month. Others are expected to make similar announcements shortly.

Irish Permanent, the State's biggest mortgage lender, has increased its variable mortgage rate by 0.25 of a percentage point to 4.64 per cent. This rate will come into effect on March 1st, bringing higher monthly mortgage repayments. Borrowers with a £50,000 mortgage over 20 years, for example, will see a monthly increase of £6.75 (€8.60) to £320.11, from £313.36. Meanwhile, Bank of Scotland which was offering the lowest mortgage rate in the Republic has also raised its variable rate from 3.69 per cent to 3.94 per cent. At this level, Bank of Scotland is still maintaining a tight margin above ECB rates and is likely to remain the most competitive mortgage provider if other institutions raise rates as expected.

The rate rise reflects the 0.25 of a percentage point increase in ECB rates to 3.25 per cent earlier this month. So far, Tusa, the joint venture between TSB Bank and Superquinn, is the only institution to state that it will not pass on the rate rise to customers.

Industry sources now expect announcements from other institutions in the coming weeks. The EBS and First Active are expected to be among the next group to pass on the rate rise.

Irish Permanent has put an end to the wait-and-see game which the Irish institutions have been playing since the ECB's move. With competition so intense in the mortgage market, lenders were seeking to avoid being the first to pass on the higher rates.

First Active said it was continuing to review its rates and would decide shortly. The two were continuing to monitor interest rates for the moment.

The aggressive pricing policy introduced by Bank of Scotland in the mortgage market has put pressure on the main lenders to cope with tighter profit margins and has been responsible for the delay so far in raising rates.

Meanwhile, the rate increases should bring some good news for depositors. Irish Permanent has said it will also increase the interest rate on a range of its term deposit accounts with increases of 0.75 of a percentage point applying to certain accounts where customers must give more than 60 days notice before withdrawing funds.

Competition in the savings market has also prompted a swift rise in deposit rates. The former UK building society, Northern Rock, continues to offer the highest paying demand deposit account with an interest rate of 4.25 per cent for amounts exceeding £500. Comparable rates are available at other institutions but savers must be prepared to commit their funds for periods of at least one to two years.