Mortgage interest relief will be phased out over next three years
Budget move to close scheme will increase cost of 300,000 loans
People who bought between January 1st 2004 and the end of 2012 will get at least some relief on their mortgage payments until 2020. File photograph: Rui Vieira/PA Wire
The decision to abolish mortgage interest relief will lead to almost 300,000 mortgage holders paying more for their home loans.
However, by tapering the relief out rather than scrapping it immediately, the blow will be cushioned for most of those affected.
The scheme was initially scheduled to expire at the end of 2017 but in his first budget as Minister for Finance Paschal Donohoe announced on Tuesday that he would extend it on a sliding scale which means people who bought between January 1st 2004 and the end of 2012 will get at least some relief on their mortgage payments until 2020.
A reduced rate of 75 per cent will apply next year, falling to 25 per cent in 2019, 50 per cent in 2019 and 25 per cent in 2020.
The average benefit is around €600 which means the tapering off will cost affected homeowners an average of around €125 next year.
Scrap the relief
However, others have described the move as equitable as to do anything else would be to disadvantage the buyers of today.
The director of research at Savills Ireland, Dr John McCartney, described the announcement as “fundamentally fair”.
He said people who bought homes between 2004 and 2012 were eligible for the relief “on the basis that they bought at high prices and therefore face high repayments”.
However, he said that “average house prices are now 2.1 per cent higher than they were in early 2004 and 3.2 per cent higher in Dublin”.
It would be “unfair to exclude people buying today at higher prices than 2004 from mortgage interest relief while continuing to extend this benefit to boom-time buyers in perpetuity,” he added.