The European Central Bank has raised its key interest rate by a quarter percentage point to 2.25 per cent. The widely expected rate rise is the first time the ECB has tightened monetary policy in five years.
Today's rate rise will mean higher monthly repayments for holders of fixed rate mortgages though some lenders have held back on raising the variable rate.
The monthly repayment on a 20-year mortgage of €300,000 fixed for three years will rise by €72 to €1,816 and by €65 to €1,881 on the same principal over five years , according to figures supplied by First Active. The payment on a two-year fixed rate mortgage will rise by €56 to 1,778 based on
First Active's new two-year rate of 3.75 per cent.
First Active said it will not be raising its variable rate while EBS Building Society said it will not decide on any rate increases until next week.
ECB President Jean-Claude Trichet put markets on notice of a rate hike two weeks ago when he said the Governing Council was ready to "moderately augment" rates to counter the threat of inflation in the euro zone.
Analysts expect the ECB to follow up with one or two more small increases next year, though the ECB has indicated it will refrain from a lengthy campaign like the US Federal Reserve's.
"It is the first rate hike in many years so it's going to be a very interesting press conference," UBS economist Holger Fahrinkrug said.
"I suspect that the nuances of the justification will be interesting and will hopefully give us some clues about the pace of further interest rate hikes."
Mr Trichet will also unveil updated economic projections from ECB staff, which are expected to show better economic growth and higher inflation than the last forecasts in September.
Economists said such revisions would help the ECB to justify higher rates, and the growth assessment would provide an insight into future rate hikes.
Today's rate hike is unlikely to much effect on the buoyant property market according to estate agents Sherry FitzGerald.
"Such an increase in the cost of borrowing while not prohibitive will temper price growth somewhat," said Sherry Fitzgerald's economist Marian Fiinegan.
"Assuming that other factors do not change in particular that stamp duty rates remain constant price inflation in the Irish second-hand market is likely to be closer to 10% in 2006 with a slightly higher figure achievable in the main cities such as Dublin," she said.
The Irish Congress of Trade Unions (Ictu) criticised the move. General Secretary, David Begg, said it would have "a more serious impact than many seem to think."
"It must be remembered that the cohort of people most affected - young couples - are the same people who have to struggle with exorbitant childcare costs.
Mr Begg also said that the increase was "ill-judged" in economic terms. "Economic recovery in Europe is very tentative. An interest rate increase may set it back before it can take hold. This is particularly worrying in the context of manufacturing industry facing competition from emerging economies."