Mounting pressure on Coalition to help mortgage holders as interest rates rise above 4%

The Government is under pressure to help struggling mortgage holders in the budget, with a key group of Independent TDs demanding action, as the average interest rate attached to new home loans rose above 4 per cent in June — the highest level in almost a decade.

The Regional Independent Group, a Dáil grouping of eight TDs whose votes have helped to prop up the Government during contentious votes, have made action on mortgage interest relief a core part of their pre-budget demands.

The group was involved in political deal-making with the Coalition earlier this year as the Government faced a series of votes on its decision to end the eviction ban. In addition to seeking action on mortgages, it is asking that a VAT rebate be given to the buyers of new homes in order to bring down their repayments.

[ Irish mortgage rates hit decade high above 4% ]

[ Few ‘mortgage prisoners’ can realistically switch providers, expert warns ]

Independent TD for Galway East Séan Canney, and group member, said mortgage interest relief was “not a cost, it’s an investment in the future of private housing in our country”.

Mortgage rates hit highest level since August 2017

---

Sweden cuts interest rates by a quarter point

---

‘Very few people believe that the next year will be a good time to buy a home’

---

The outlook for interest rate cuts is changing - so should Irish borrowers be worried?

---

Wexford Independent Verona Murphy — not among the group members to back the Government during the votes on the eviction ban — said first-time buyers were being “stretched to their limits to purchase the most basic housing units in regional Ireland”.

Amid sustained interest rate rises from the European Central Bank (ECB) in an effort to bring inflation under control, the average interest rate attached to new mortgages in the Republic rose to 4.04 per cent at the end of June, tightening the squeeze on borrowers. The Irish Central Bank said this was an increase of 20 basis points on the previous month and up 136 basis points on this time last year. The monthly jump was the second largest in the euro area.

The ECB has called for fiscal measures to offset the cost of living crisis to be generally phased out. While Government sources indicated a broad mortgage interest relief remains highly unlikely, the pressure to counteract the impact on households of higher rates is set to become a key budget battleground.

In another indicator of strain in the housing market, rents continued to rise nationally in the second quarter of this year, although they have “stabilised” in Dublin, according to new figures from the Daft.ie website. The company’s latest quarterly rent report which is based on asking prices on its website, found rents rose 10.7 per cent nationally in the past year to stand at just under €1,800 per month on average.

[ Scheme for mortgage holders in arrears to be extended until 2027 ]

Elsewhere in Europe, Italy watered down a windfall tax proposal aimed at its banking sector, insisting that lenders would pay no more than 0.1 per cent of their assets under the proposal, which drove down shares in Italian banks when it was announced on Tuesday. Bank profits have been driven to record recent highs in the Republic and elsewhere as lenders capitalise on rising interest rates.

Is mortgage interest relief a really bad idea?

Listen | 44:39

Labour Party finance spokesman Ged Nash said that profits at AIB, Bank of Ireland and Permanent TSB were “at 2007 levels”. He said the banking levy, which generated €87 million this year, should be retained, and called on the Government to consider a “potential super-levy to be charged and at a higher rate than in previous years. This is especially the case in light of the super-normal profits enjoyed by Bank of Ireland, AIB and PTSB which is largely down to increases in ECB interest rates, the slow approach taken by the banks on rewarding depositors and related factors.”

People Before Profit–Solidarity TD Paul Murphy said: “Banks have been making super profits from high interests on deposits with the ECB. At the same time, mortgage holders are facing rising repayments to those same banks. As a starting point, we should have a windfall tax on the banks’ profits.

“Ultimately we want to see the nationalisation of the banking system so it can be utilised as a democratic public utility for society as a whole.”

The regional TDs’ group is expected to submit its shopping list of demands to Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe in early September. It is also expected to seek increased allowances for older people to adapt their homes and to overhaul or introduce a range of schemes supporting mobility among disabled people, including payments to take adapted taxis and grants for those who need to adapt their own private car.