The latest .25 per cent rise in interest rates will hardly have warmed the cockles of mortgage holders who are being increasingly squeezed financially wherever they look right now.

They drive to the pumps and lament the passing of cheap fuel. They do their groceries and are passing more notes across the counter in so doing – more potatoes for more potatoes if you will.

And now their mortgage repayments have gone up by about €40 – if you’ve got a 20-year mortgage on a house valued €275,000, that is.

While interest rates remain very low when compared to what consumers faced in the 80s, last Thursday’s European Central Bank announcement has laid another straw on the economic camel’s back.

And while it’s by no means broken yet, the strain is certainly becoming more stressed on consumers and businesses and of that there is no doubt.

In his latest economic commentary, IIB Bank’s Austin Hughes has described the ECB’s rate increase as its attempt to “guard against the threat of persistently high inflation”.

He added: “Of necessity, this implies much greater risks in the near term of notably weaker activity across the Eurozone.”

What did ECB President Jean Claude Trichet have to say about all this? “It is imperative to ensure that medium to longer-term expectations remain firmly anchored at levels in line with price stability,” he said.

“The shift in relative prices and the related transfer of income from commodity-importing countries to commodity-exporting countries have to be accepted. They require a change in behaviour of companies and households.

“Therefore, broadly based second-round effects stemming from the impact of higher energy and food prices on price and wage-setting behaviour must be avoided.”

Hughes described Trichet’s language as “extremely carefully chosen to provide the ECB with maximum room for manoeuvre. So, although there was a clear intention to calm market fears, there was no commitment that rates will not rise again in the months ahead.”

The rate increase is bad news, Hughes believes and “will harm a fragile Irish economy”.

He continued: “Although the mechanical impact of a quarter per cent to hit the monthly budgets of households with borrowings is not be underestimated, the more significant impact is likely to be on consumer and business confidence….

“The cumulative impact of the credit crunch on borrowing costs together with (last Thursday’s) rate increase as well as sharp increases in food and fuel prices imply Irish economic growth will be marginally positive at best this year and relatively modest in 2009.”

Most commentators have also predicted a further .25 per cent increase in either September or October, so it’s best to brace one’s self for more bad news on the mortgage front over the next few months.