The European Central Bank (ECB) says it will raise its key interest rates for the first time in over a decade next month.

It also says it expects to raise the rates again in September, with "a gradual but sustained path of further increases" beyond that.

Oana Peia is assistant professor at the School of Economics in University College Dublin (UCD).

She told Newstalk Breakfast what the ECB change means.

"The households that will be directly impacted... will be those that hold some loans or mortgages with variable interest rates.

"They will most likely see hikes in their interest rates.

"To give you an example: if you have a mortgage of about €300,000 - a 30-year mortgage - at a rate of 3.5%, you'll be paying a monthly installment of around €1,350.

"Now suppose that the interest rate on this mortgage increases by 0.25%... that will increase your monthly installments by about €40 - which amounts to about €15,000 over the 30-year period of the mortgage.

"So that's a sizable increase in interest rate expenses."

'Largely positive'

But she says this announcement wasn't a surprise.

"The policy announcement was largely expected by markets - this is considering that the projected Euro area inflation for 2022 is now at 6.8%.

"Core inflation, which is inflation excluding energy prices, stands at 3.3% - which is still significantly higher than the ECB's target."

However, Ms Peia says most mortgages in Ireland at the moment are actually fixed rate.

"The good news is that, according to statistics from the Central Bank of Ireland, not a huge majority of mortgages currently in Ireland are variable.

"So for example, 82% of the new mortgages that we issued in April were fixed rate.

"So we won't expect huge increases in interest rates over a board part of the Irish population - that's largely positive I would say".

The announcement comes as Ireland records the largest annual increase in the consumer price index since 1984, with costs rising by an average of 7.8%.