Borrowers can expect to receive notices of increased monthly repayments next week as lenders move to pass on the latest interest rate rise by the European Central Bank.

The actual monthly increase will be small but given that the rise is the seventh in less than a year, the cumulative increase - at 2.25 per cent - will intensify pressure on some mortgage holders.

Borrowers with a £100,000 (€126,974) loan will face an increase of £14 a month as a result of the latest increase. The cumulative rise amounts to £119 per month.

Savers are also likely to benefit. However, with a few exceptions, lenders do not pass on the full benefit of rate rises to their savers.

The increasing cost of mortgages is bad news for borrowers particularly those who may have borrowed to the limit of their ability.

Mr Martin Walsh, head of lending at EBS, pointed out that for a significant and growing group of those not yet or only recently in the market, the latest rise could be the straw that breaks the camel's back.

"What we need is a housing authority to look at the whole market to see where the administrative, national or local government level blockages are and bring more supply into the market. We need to change expectations now."

However it is likely that the continuing steady drip of rising rates will bring back expectations in the housing market. The latest Sherry FitzGerald index of house prices, released yesterday, showed a significant deceleration in the rate of house price inflation over the past three months. The average price of a second-hand home in Dublin rose by 1.6 per cent in the three months from June to September, compared with 5.2 per cent in the same period last year. However, the average house price inflation in the nine months to end September was still 15.9 per cent.

In the short term, higher mortgage repayments will increase the consumer price index. But in the longer run they may reduce demand in the economy as borrowing costs rise, helping to reduce some domestically-generated price rises.