Some will ‘fall on wrong side’ of new mortgage interest relief scheme, says Minister

Minister for Finance Michael McGrath has said that some people will “fall just on the wrong side” of the new mortgage interest relief scheme announced by the Government as part of Budget 2024.

The relief will be on the table for people with a home loan of between €80,000 and €500,000 at the end of last year and will cover changes to mortgage repayments over the course of 2023, up to a maximum of €1,250.

The scheme will only operate for one year, however, and will be based only on the increased amount of interest paid in 2023 compared to 2022.

Interest rates

“Any interest paid in 2024 is not relevant to the scheme that I announced in the budget today. It is 2023 versus 2022. What happens from the first of January onwards in 2024 is not relevant to the scheme,” he said, when asked about people who may find themselves coming off fixed rates in the new year and facing higher repayments in 2024.

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“We can’t predict the direction of interest rates class next year. This scheme is to reflect the extra amount that people have already paid or will have paid by the end of this year. The truth is people are in lots of different circumstances. And whenever you introduce an element of targeting in any scheme, you will have people who fall just on the wrong side of it.”

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The Government has also defended its funding of the health service, but warned that recruitment next year cannot outstrip what funding the Coalition has provided.

An additional €800 million in core funding is being provided to the health service in Budget 2024 to meet the needs of an ageing and growing population. This is the smallest increase in funding for some time, following a run of €1 billion-plus rises over recent years.

Mr Donohoe said, “if we are in a position where we’ve agreed what that we can hire additional administrative staff, additional managerial staff, and if that target for the number of people that are hired during the year has exceeded ... what we’ve actually funded, what we’re simply saying ... that can’t continue.”

The Government has also responded to claims made by Sinn Féin that the budget benefits landlords more than tenants, after it emerged that tenants will receive an increased €750 rent credit, while landlords will eventually, by 2026, receive tax breaks worth €1,000.

“It is typical Sinn Féin policy to try and set people off against each other and make value judgments. That’s exactly what they are doing here. The benefit next year in cash terms is greater to a tenant than it is for a landlord. By the time the benefit for a landlord rises to above the benefit currently in place for a tenant, there will be future budgets, there’ll be more opportunities for this Government and other governments to increase further the support available for tenants in the form of the rent tax credit,” Mr McGrath said.

“The departure of small landlords, in particular, from the market is undisputed. We have few new landlords coming into the market. This has resulted in a real tightening of the rental market. And while we all advocate for tenants and rightly so, there’s no tenant and there’s no home if there isn’t an investor or landlord providing that home.”

Welfare increases

Meanwhile, advocacy groups have said that social welfare payment increases of €12 do not go far enough. The party leaders did consider higher amounts but opted for the same increase as last year.

“The great challenge the Minister for Finance and I worked together on, is how we can do things that we are confident we can genuinely afford,” said Minister for Public Expenditure Paschal Donohoe.

“And I believe that the decision that we’ve made of an increase of €12, given the norm for a few years before was €5, I believe an increase of that scale is one that we know we can afford.”

Mr McGrath was also asked why the Government did not proceed with separating out hotels and restaurants in relation to VAT treatment.

“We did consider this issue in the lead-up to the end of August. The sector made a case for the separation of the treatment of accommodation from other parts of the hospitality and tourism industry, in particular food. The truth is the cost was going to be far too high. The cost of extending the lower 9 per cent VAT rate for a full year to both food and non-food was of the order of three-quarters of a billion euro. If you increased it for accommodation only, the cost was still in excess of €600 million. So the cost was really high, and simply not affordable.”