Mortgage holders are facing increased repayments in the coming weeks as the European Central Bank prepares to hike interest rates again.

The bank’s governing council meets in Frankfurt tomorrow, where it is widely anticipated that a further increase in its main interest rates will be applied.

“The ECB will almost certainly increase interest rates by 25 basis points tomorrow, as announced last month and confirmed by ECB officials since. We think that now is not the time to raise rates," said senior economic adviser to the Ernst & Young Eurozone Forecast Marie Dirron.

"Data on economic activity in the second quarter point to a clear slowdown compared to the first quarter. While this is something that we are seeing at the global level, it highlights the fragility of the recovery in the euro zone and its ongoing dependence on global growth.

"Moreover, with the spectre of a disorderly restructuring of Greek debt looming over the Eurozone's future, the risks to the growth (and hence inflation) outlook are so skewed to the downside, that prudent monetary policy management would suggest waiting before raising rates."

The ECB has increased rates once already this year, raising its main refinancing rate to1.25 per cent  from a historically low 1 per cent, the first rise in two years.

Last month, the bank held interest rates steady but ECB president Jean-Claude Trichet has since indicated a hike was on the way in July. He said the bank will exercise "strong vigilance" over price pressures, using a phrase that in the past signalled a forthcoming rise.

European analysts have estimated that inflation in the euro zone remained at 2.7 per cent in June, the same as in May and well above the ECB's target of 2 per cent.

Irish mortgage lenders have applied their own increases in the past few months, leading to further pressure on hard-pressed consumers.

Consumer sentiment last month recorded its lowest reading since February, with the potential for increases in mortgage payments playing a part in this.