Financial pressure on tens of thousands of homeowners has been increased after the European Central Bank today announced a rise in interest rates for the first time in almost three years.

The ECB said it was raising rates by a quarter of a percentage point to 1.25% in an effort to combat inflation.

It will push up monthly repayments for those with variable and tracker mortgages. Some banks have already announced increases in mortgage interest rates in response to today's decision.

ECB President Jean-Claude Trichet said no decision had been made on whether to increase rates later in the year.

However, it is widely predicted there will be further hikes as early as September.

Bank of Ireland and its ICS subsidiary have announced that they will be raising their fixed mortgage rates. The increases ranging from 0.7% to 1.3% will come into effect from 15 April.

Bank of Ireland and ICS tracker rates, which are linked to the ECB rates, will rise by a 0.25% from 13 April.

Jonathan Byrne, the bank's head of mortgages in the Republic of Ireland, said fixed rate mortgages had become increasingly costly for the bank in recent months.

Mr Byrne said its current fixed mortgage rates were 'not sustainable'.

He said: 'While we have resisted increasing rates until now, we have no choice but to make this move to ensure we remain open for business.'

National Irish Bank also said its ECB-linked tracker mortgages will increase in line with the ECB increase.

A person with a €300,000 mortgage could see monthly repayments rise by around €40.

Earlier, the Tánaiste told the Dáil that the Government was concerned about the ECB decision to increase interest rates.

Eamon Gilmore said the Government was 'acutely aware' of the difficulties faced by many households.

He said it had proposed a range of measures in the Programme for Government, including possible increases in Mortgage Interest Relief, moratoriums for householders facing eviction, and changes to personal bankruptcy laws.

He was responding to Sinn Féin's Mary Lou McDonald, who accused the Government of being 'asleep at the wheel' on the issue.

ECB inflation concern

The rates rise announced by the ECB, which will trigger higher mortgage repayments for thousands of homeowners in Ireland, was widely expected.

The decision was taken by the ECB's 23-member Governing Council in Frankfurt.

ECB president Jean-Claude Trichet said the decision to raise rates was unanimous, but he said the council did not make a decision that this would be the first in a series of rate rises.

Mr Trichet said the rise in rates was due to the risk of higher inflation, mainly from higher prices for oil and other commodities.

He said it was important that this did not lead to broader inflationary pressures on prices and wages.

The ECB has a target of keeping inflation below or close to 2%. The rate was 2.6% in March.

Mr Trichet said eurozone interest rates remained low and were still supporting economic growth and job creation.

He said the latest data pointed to 'continuing positive momentum' in the eurozone economy, although there were high levels of uncertainty about the economic outlook.

Elsewhere, UK interest rates were kept at their record low today after Bank of England policymakers resisted pressure to curb rising inflation.

The decision, which means the bank's base rate has been at 0.5% for 25 months, comes amid further signs that the UK's economic recovery is still not strong enough to withstand the shock of higher borrowing costs.