AIB has increased the pressure on its rivals in the mortgage market by leaving its standard tracker mortgage unchanged.

However, the bank said it would no longer offer a one-year discount on tracker mortgages for new customers effective from close of business today.

"To date AIB bank has maintained its tracker rates despite the rising cost of funds in the market and upward pricing by competitors. However, given the continuing high cost of funds in the financial markets, the discount offer is now being withdrawn," it said.

But crucially, AIB has not increased standard tracker rates which is being seen as a move by the bank to capitalise on the difficulties being experienced by some of its competitors to gain market share in the mortgage sector.

Last week, the State's largest mortgage lender, Permanent TSB, said it was increasing its tracker rates by as much as 0.45 per cent, while Ulster Bank said that it would stop selling mortgages through brokers from the end of next month

Permanent TSB is to raise its tracker mortgage rates for new business by 0.2 to 0.25 per cent and in some cases by 0.45 per cent in response to the higher cost of bank funding due to the credit crunch.

Bank of Scotland (Ireland), which sells mortgages through brokers, increased its rates last Tuesday. Ulster Bank and its subsidiary, First Active, have also increased mortgage rates.

"AIB obviously sees this as a moment to stay in the market when other banks are pulling back a bit and increasing rates," said Scott Rankin, an analyst with Davy Stockbrokers.

"The mortgage market accounts for a small percentage of the profits of AIB group compared to Bank of Ireland and Permanent TSB. It can afford a bit more to take a little pain for gain in the long run."