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Bank chief warns of mortgage hike

MORTGAGE-HOLDERS face a hike in rates in the coming months as concerns grow about inflation in the eurozone.

European Central Bank (ECB) president Jean-Claude Trichet warned that signs of a rise in inflation in the eurozone could cause the ECB to move on rates.

Some 600,000 homeowners on tracker and variable-rate mortgages could be looking at higher repayments by the end of the summer.

The 400,000 Irish homeowners on tracker mortgages will see their repayments increase as the ECB rate rises while 200,000 variable-rate mortgages will also be impacted.

Inflation jumped last month to 2.2pc, the first time in two years that it has risen above the Central Bank's target of just below 2pc.

Mr Trichet added: "We see evidence of short-term upward pressure on overall inflation, mainly owing to energy prices, which has not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon."

However, its understood that the ECB is aware that higher interest rates would create higher borrowing costs for debt-laden countries such as Ireland, Greece and Portugal.

The ECB president also rejected suggestions from the governor of the Central Bank, Patrick Honohan, that a risk-insurance scheme could be put in place for Irish banks, which would involve Europe and the International Monetary Fund guaranteeing potential bank losses.