European Union economics expert have warned that the Irish housing market is overheating and could suddenly burst with the impending interest rate rise.
A survey conducted by ten leading research bodies across the EU, including the Economic and Social Research Institute (ESRI) in Ireland, said interest rate rises would help cool down prices.
Dr Alan Barrett, ESRI economist, said: "We are not being negative but there are warning signs.
Dr Alan Barrett, ESRI economist
"What we are saying there is that the interest rates are certain to go up. Some people are saying 1 per cent, we say 0.1 per cent. Our concern is that the property market is overheating.
"Although an interest rate increase is not so particularly pleasant the increase is a good thing for stability," he said.
But Dr Barrett noted the Spring 2006 survey pointed out that stronger growth in the euro will be good for Ireland because it will translate into stronger demand for Irish exports.
He said continued increases in ECB interest rates will lead to further increases in mortgage repayments and possibly to a cooling in the property market.
Dr Barrett also noted that continued increases in interest rates will adversely impact inflation, although the easing oil price will act to counterbalance this.
The survey said while continued imbalances in the US economy cast a shadow over the growth forecast for the Euro Area, the implications for Ireland of a downturn would be even stronger.