The European Central Bank (ECB) has raised interest rates for the second time this year, as it continues to seek to quell an energy-driven rise in inflation triggered by the conflict in the Middle East.
Attacks by both the US and Iran since the end of August have shattered a month of relative calm, with both parties hitting military, shipping and energy assets.
That has sent oil prices back above $100 a barrel and revived fears about a wave of price hikes in the fuel-importing euro zone.
The ECB has now responded by raising its policy rate to 2.5% from 2.25%, saying inflation was expected to stay above its 2% goal for some time.
"The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period," the ECB said in a press release.
The move will automatically affect tracker mortgage customers whose repayments will rise by €13 per month for every €100,000 borrowed. It will also put upward pressure on other mortgage rates over time.
The news comes as separate figures from the Central Statistics Office (CSO) indicate that mortgage interest repayments in Ireland have risen by 10% in the last 12 months.
The latest hike will potentially impact variable rates offered by Irish banks in the months ahead and people coming off fixed rates are also likely to have to pay more.
On the plus side, savers may be able to shop around for better rates as some financial institutions may raise their savings rate on the back of the latest ECB hike.
The latest increase is the second in three months, with financial markets forecasting there could be another before the end of 2026.
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