Position is determined by CTR x Max CPC. If either raises or falls, your position will change as well.
Often, raising CPC will raise position, and this position will raise your CTR, and if your CTR raises enough, it will actually lower your CPC while maintaining the same position. Although, you should monitor your bids closely when raising CPC to make sure you don't overspend.
More competition has probably moved in to your space driving CPC up. You can try raising the Max. CPC and increasing your daily budget.
Or you could work on writing better ad copy too. This could increase your CTR. Just add a new Ad to the campaign and experiment to see which one pulls best. Adwords will automatically display the better ad more often.