Mortgage relief:An estimated 125,000 people with their first homes are set to benefit from changes in mortgage interest relief by the Minister for Finance.
Mr Cowen steered clear of the controversial stamp duty issue, but doubled interest relief on mortgages from €4,000 to €8,000 for single people, and from €8,000 to €16,000 for those married or widowed.
The new allowances affect not only people about to purchase their first homes, but those who are still in the first seven years of their mortgage.
The extra allowance will soften the impact of further interest rate increases, expected over the coming months.
There have been five such increases so far this year, with another quarter percentage rise expected today.
Under the initiative announced in the Budget, a couple with a mortgage of €379,000 over 33 years at an interest rate of 4.25 per cent will gain up to €1,600 per year or €133 per month. Single people will gain half that amount.
Mr Cowen is also raising the ceiling on interest relief for non-first time buyers from €2,540 to €3,000 for a single buyer, and from €5,080 to €6,000 for married mortgage holders.
The changes are expected to give a significant boost to the new homes market, which this year will produce over 90,000 homes. There had been fears that the upward spiral in interest rates would deal a severe blow to the industry, and these measures should reassure the market to some degree.
However, there was disappointment yesterday that the Minister did not make any adjustment to the stamp duty regime which, with a top rate of 9 per cent - one of the highest in Europe.
Buyers in the upper end and middle of the market had been holding back on decisions to trade up in recent weeks in the hope that the duty would be cut.
Some had contracts waiting to be signed yesterday afternoon in the expectation that the wait could save them thousands. However, insiders were adamant all along that Mr Cowen would not tamper with a tax that brings in so much cash to the coffers.
With the issue now clarified, estate agents expect the torpor that has gripped the market to lift, leading to a resumption of sales. However, the matter is likely to rumble on and possibly become one of the main issues in next summer's general election.
The property industry gave a lukewarm response to the changes in mortgage interest relief which will cost the Government €74 million in a full year - a fraction of what it collects in stamp duty and VAT.
Declan Cassidy, managing director of Gunne Residential, said that the increase in mortgage interest relief for first-time buyers will improve affordability "without artificially driving house prices to higher levels, as was witnessed when the Government made changes to the stamp duty thresholds in the past".
Paul Murgatroyd, economist with Douglas Newman Good, welcomed the doubling of mortgage interest tax relief at source, but said it was disappointing that the Government did not reduce stamp duty on second-hand homes for first-time buyers.
The Irish Auctioneers & Valuers Institute described the changes as "a sensible way to give relief to recent and potential first-time buyers that will not prove inflationary in terms of house prices".
The institute said that while the measures failed to address the inequities of the current stamp duty regime, it would bring certainty in terms of the stamp duty issue for the foreseeable future.
The Society of Chartered Surveyors expressed disappointed with the Budget, with the exception of the higher mortgage interest relief for homeowners. It also criticised the Government for not reducing the "punitive" 9 per cent rate of stamp duty on commercial property transactions, saying that the tax was driving money into overseas markets where Irish investors spent a record €8 billion this year.