Mortgage interest relief – who is not getting it and why?

The decision by the Minister for Finance, Michael McGrath, to limit mortgage interest relief measures to those on tracker and variable rates has been described as “bizarre” and of help only to people who “enjoyed rock-bottom interest rates for many years”.

In his budget speech on Tuesday, Mr McGrath outlined “targeted” mortgage interest relief measures which, he said, would cost the exchequer €125 million and save more than 150,000 homeowners up to €1,250 a year.

He said he was introducing the relief as he was “acutely conscious” of the impact 10 successive interest rate increases imposed by the European Central Bank (ECB) had had on many households.

The temporary relief will be on the table for people with loans 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, to a ceiling of €1,250.

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The relief will be on the increased interest paid on a mortgage in 2023 compared to 2022.

[ Mortgage interest relief in budget will benefit the few rather than the many ]

[ Mortgage interest relief: How do I apply and how much can I save? ]

To claim the mortgage interest tax relief, homeowners will have to apply through Revenue and provide mortgage statements for 2022 and 2023.

The relief will operate by way of a credit offset against the taxpayer’s income tax liability in 2023 with the financial returns hitting qualifying borrowers accounts from early next year.

Mr McGrath stressed that it was “not possible or desirable for Government to attempt to mitigate in full the impact of increased interest rates” but added that “what we have experienced in the past 14 months is exceptional in the history of monetary union and 10 successive interest rate increases have put many mortgage holders under considerable pressure”.

While he is not wrong to say many thousands of borrowers are under pressure, the interest relief will only benefit a small percentage of the mortgage market with hundreds of thousands of homeowners on fixed rates gaining nothing despite paying significantly more for their borrowings than those with tracker mortgages over the last decade.

Neither will the measures help mortgage holders coming out of fixed-term arrangements and into a substantially higher rate environment in the months ahead.

Describing the relief as “problematic”, Daragh Cassidy of price comparison and switching website bonkers.ie suggested it should have been “more targeted and there should have been a requirement to show that you are in some type of financial distress”.

He said the focus should have been on those whose loans have been “sold to vulture funds and who cannot move lender and who have seen their rates go as high as 8 per cent or 9 per cent”.

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He told The Irish Times that tracker customers “have enjoyed rock-bottom interest rates for many years [and] could have been on a rate as low as 0.6 per cent since 2014, while [others were] paying [up to] 4 per cent”.

He said the “tracker customers had a great run of things for many years. So it just seems a bit bizarre that the Government is rushing to help them the second rates go up.”

He pointed out that until recently Irish mortgage rates were “among the highest, if not the highest, in all of the euro zone. Partly because everyone else had to subsidise the ultra-cheap, near loss-making trackers. Where was the help for other mortgage customers back then?”

He suggested it was “a classic example of the Government bowing to political pressure at the last minute when there was really no need to do so”.

Rachel McGovern of Brokers Ireland said that it “would have been better if we had seen a return to the old mortgage interest relief system for a fixed period of say three to five years to assist consumers who will be coming off fixed rates over the next 12-24 months, as they will be caught with increasing rates”.

She stressed that it was “important in the current environment to create stability and confidence and this would have been a better way in which to achieve that”.

Many who have been paying higher rates for years will be forgiven for questioning why tracker holders are being looked after now when they were the beneficiaries of low rates for many years.

Jenny Doyle is one of them. She moved from Dublin to Newbridge in 2015 and has 17 years left on her mortgage. She contacted The Irish Times to say she is on a fixed rate for the next three years and opted for a longer term because she had read that rates were on the rise.

She said she had “no sympathy for tracker mortgage holders as they have had a great deal for years with very little interest. Just cause they didn’t act wisely, they are now paying the monthly increase.”