Interest relief for first-time buyers during boom

TAX BREAKS:Some couples who bought high-priced houses will be €2,000 better off next year

THE BUDGET offered a glimmer of hope by way of enhanced tax breaks on mortgage interest for some homeowners who bought at the height of the boom – and the question many asked as soon as Minister for Finance Michael Noonan sat down after delivering his speech on Tuesday was: “What’s the bottom line?”

The good news is that some couples will be better off by as much as €2,000 next year, while a single person who meets certain criteria for the enhanced relief will have €1,000 extra.

In 2012 the rate of interest relief for first-time buyers who took out a first mortgage between 2004 and 2008 will increase to 30 per cent from 15 per cent, as long as they are owner-occupiers.

Individuals who took out loans in 2004 as first-time buyers will see a maximum gain of €450 per year, while couples who bought in the same year will benefit by €900. The changes will bring their total maximum relief to €900 and €1,800 respectively. This benefit is relatively small, as under a rule which says people can only be considered first-time buyers for seven years, those who bought in 2004 now get relief at non-first-time buyer rates, which have a ceiling of €3,000.

Single first-time buyers who took out loans in 2007 will gain most from the changes and will benefit by up to €1,000 for singles and €2,000 for couples in 2012 and 2013. This will take their total maximum relief in 2012 and 2013 to €3,000 and €6,000 respectively.

These mortgage holders will receive relief on the increased ceilings for first-time buyers in 2012 and 2013 of €10,000 or €20,000. In 2014 they will be entitled to the increased rate of relief on non-first-time buyer ceilings under the seven-year rule.

It is not just first-time buyers who bought between 2004 and 2008 who could benefit from the budget. In an effort to kick-start the moribund property market, Noonan has dangled a carrot in front of would-be buyers who are considering making a move next year. First-time buyers who buy next year will get relief of 25 per cent, an increase of 10 per cent over what had been proposed by the previous administration.

For those who buy, this rate will stay the same in 2013 before falling to 22.5 per cent for 2014-2016, on the same ceilings. In 2017 it will drop further to 20 per cent, meaning for that year they would get a maximum relief of €2,000 for singles and €4,000 for married buyers.The relief will be scrapped in 2013, so next year would-be buyers will have to weigh up possible further falls in property prices as of that year against a definite loss of tax relief if they wait.

There is even something to encourage people to buy their second or subsequent home next year. If they do they will benefit from a 15 per cent rate of mortgage interest relief instead of 10 per cent, which had been proposed by the last government.

People who bought before 2004 and those who bought their second or subsequent homes between 2009 and 2011 have been given nothing by the Minister, although he said measures to deal with mortgage arrears would be unveiled “shortly” – something which will hardly be of much comfort to many of those people.