Central Bank governor John Hurley said recent interest-rate hikes by the European Central Bank (ECB) will cool the Irish housing market and prevent it from overheating.

The ECB raised rates for the second time in three months on March 2nd, the same day the Organisation for Economic Co-operation and Development (OECD) warned that the housing market was overvalued. "The increase in interest rates would have a modest downward effect in terms of growth and prices," Mr Hurley, who is also an ECB council member, told Bloomberg News. "It's obviously a good thing."

The governor also said people should be wary about accumulating debt, especially in a low interest-rate environment.

Increases in borrowing costs reduce some people's ability to meet mortgage repayments.

"We're a very open economy, and because of that openness, we're vulnerable to an outside shock and a shock on the economy would be a shock to the housing market," Mr Hurley said in the interview.

Irish house-price inflation amounted to 10 per cent in January, compared with just over 9 per cent in December and just over 8 per cent in January 2005, according to the latest Permanent TSB/ESRI house-price index.

Mr Hurley said during this week's interview that underlying economic growth, along with other factors, would continue to maintain the housing market.

"The fundamentals of the Irish property market are very, very strong, and in the past number of years we've had low interest rates, significant growth in disposable income and the demographic trend has been strong," he said.