Mortgage interest relief to be cut

Mortgage interest relief for owner-occupiers will only apply for the first seven years of a mortage under new rules announced in today’s supplementary budget.

Anyone who has been receiving interest relief for the past seven years will no longer be eligible after May 1st.

Minister for Finance Brian Lenihan said the level of tax that investors can claim on residential rental properties will be reduced from 100 per cent to 75 per cent. This will apply to both new and existing mortgages. Commercial properties are not affected.

These measures will save an estimated €96 million this year and €128 million in a full tax year.

He warned that the Government was considering abolishing mortgage interest relief in the future to reflect lower interest rates and falling house prices.

The Minister also said a property tax may be introduced next year.

Capital gains tax, which was raised from 20 to 22 per cent in Budget 2009, was raised to 25 per cent. This increase will apply to all deposits from midnight tonight and is expected to raise €30 million this year and €45 million in a full year.

Mr Lenihan also announced the establishment of a stamp duty “trade-in” scheme. Under this measure, a person who accepts a traded-in property in exchange or part exchange for a new home will not have to pay stamp duty. The duty will be due when they subsequently sell on the house.