Borrowers are likely to face higher repayments following an expected interest rate increase today when the European Central Bank (ECB) meets in Frankfurt.
Mounting expectations of a further interest rate rise today have also driven the euro back above 96 cents and the pound above 80p against sterling.
Banks and building societies are likely to pass on the rate increase over the coming weeks. The cost of repayments on a £75,000 mortgage over 20 years would rise by £10 per month to £500.
Economists say the European Central Bank is expected to raise interest rates at its governing council meeting today or if not in two weeks' time and economists say rates could reach 4.5 per cent or higher by the end of the year.
The move is likely to be welcomed by the authorities here as a small brake on house price rises. If sustained, the euro's recovery is also likely to be good news for inflation as import prices from areas such as the UK fall back.
According to Mr Jim Power, chief economist at Bank of Ireland, news that German manufacturing orders are continuing to expand will almost guarantee that rates will go up today. "Every piece of economic data is now suggesting that investment is picking up strongly."
At the same time, the dollar is weakening across the board against the euro, the yen and sterling as rate expectations for the US are revised downwards.
The euro closed at $0.9605 from $0.9560 and at 63.05p from 62.81p on Tuesday.
