Many mortgage holders have been hit hard by 10 successive increases in mortgage rates from the European Central Bank. This has led to calls for Government support. Last week Taoiseach Leo Varadkar said this was being considered, but hinted that it would be on a limited basis, only applying to those facing particular difficulty.
As in a number of other policy areas, attempting to help mortgage holders crates a dilemma for the Government. If it does it via a return of mortgage interest relief – the tax relief scheme administered by the banks – it would be expensive and hard to target. Sinn Féin has suggested a variation, with only those who have faced higher repayments getting relief for a temporary period.
The alternative is to go for a much more restricted policy, perhaps a revival of a mortgage interest supplement scheme, a means-tested programme which operated through the welfare system. It was closed off to new entrants in 2014.
Neither approach is ideal. Any form of general mortgage interest relief will be costly, hard to withdraw and will support some who need support and many who do not. We saw during Covid, however, that tightly drawn, more restricted schemes can have a small take-up and not be very effective.
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There is also a question of fairness, in terms of designing a support. Tracker mortgage holders have suffered significant increases in repayments but previously paid at lower rates than many other borrowers for years. Those on newer, fixed rates have seen no increases, but will suffer a big hit as they roll off into new agreements. A smaller group whose loans were sold to investment funds are already paying at significantly higher rates.
Designing a general scheme to address genuine need in these diverse groups, without wasting large sums of money, is difficult. There are things which can be done – the banks must be pushed to meet promises of taking on loans currently held by investment funds and the funds need to offer fixed rate deals to borrowers. But in terms of offering wider supports the Government needs to proceed with cau
