Homeowners should brace themselves for two further increases in interest rates between now and September, Davy Stockbrokers has warned ahead of the European Central Bank (ECB) meeting in Dublin this week.

The ECB's governing council is expected to leave interest rates on hold when it meets in Dublin on Thursday. However, interest-rate watchers will be listening carefully to ECB president Jean-Claude Trichet for confirmation that it will increase its base rate by a quarter point in June.

Davy chief economist Robbie Kelleher said he believed a further quarter-point hike in September after an "almost certain" increase at the June meeting was "the most likely outcome" of the current cycle of interest rate movements.

Use of the word "vigilance" by Mr Trichet should indicate that the June rate increase will go ahead, according to economists at AIB's global treasury department.

"Given the strength evident in recent activity and monetary aggregates data, as well as the further improvement in the labour market, a hawkish tone is likely to prevail," AIB said in its weekly market brief.

An increase in June would take the ECB's key interest rate to 4 per cent and would complete a doubling of European interest rates since December 2005, when the ECB increased rates for the first time in five years.

If another increase takes the ECB rate to 4.25 per cent in September, mortgage interest rates will climb to beyond the point at which many borrowers who took out loans before December 2005 were "stress-tested".

Under the stress-testing system, which is voluntary but closely monitored by the financial regulator, mortgage lenders test to see whether loan applicants would be able to afford repayments should interest rates rise to 2 percentage points higher than the existing standard variable rate.

The ECB has raised interest rates seven times in the last 18 months, with each increase adding between €15 and €50 to the monthly repayment cost on a typical Irish mortgage.

The ECB is one of the three major central banks due to meet this week.

The US Federal Reserve is expected to leave its rate unchanged at 5.25 per cent on Wednesday, while it is anticipated that the Bank of England will increase rates by either a quarter or a half-percentage point on Thursday.