Bank of Ireland said on Wednesday that it will increase the standard variable rate (SVR) on its UK residential mortgage book that it is in the process of winding down by 1.5 percent later this year.

The bank, which plans to exit the UK market through the sale of parts of its book and by taking on no new business as its remaining mortgages expire, said it would increase its SVR by 1 percent to 3.99 percent from June and by a further 0.5 percent to 4.49 percent from September.

The bank, Ireland's largest lender and the only one not under full state control, said the move marked its first increase since 2007, adding that the cost of funding mortgages had risen significantly for UK lenders in recent years.

It announced last month that deposits made with its UK arm will not fall under Ireland's expensive government guarantee scheme from the end of March, boosting hopes of lowering its funding costs this year.

(Reporting by Padraic Halpin; Editing by Jon Loades-Carter)