Mortgage interest relief in budget will benefit the few rather than the many

So how was Budget 2024 for you? At least no one can say they were surprised as not a single measure announced by the Government on Tuesday had not already been carefully trialled in the court of public opinion. Such is the reality for an administration that is running out of time to make a good impression.

The measure that grabbed the public attention – at least to judge by The Irish Times/PwC Budget Q&A with readers on Wednesday morning – was the decision to offer limited mortgage interest relief.

The Government is clearly keen not to open an expensive Pandora’s box by restoring the universal mortgage interest relief that was available to homeowners who took out mortgages before 2012 and that was only finally phased out three years ago. But the mortgage relief measure outlined by Minister for Finance Michael McGrath appeared to upset as many people as it cheered.

And it seemed designed to do so. Available for one year only, it was limited to homeowners who had an outstanding balance on their mortgage at the end of last year of between €80,000 and €500,000. And the relief applies to the difference between the interest bill this year and last year. That reduces the benefit, of course, as more than half of the increase since the European Central Bank started raising interest rates occurred last year.

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It probably didn’t help that the biggest winners are likely to be holders of tracker mortgages, who are, as Irish Times managing editor Cliff Taylor noted in our Budget 2024 Inside Business podcast, a “probably older, slightly better-off cohort with a lot of their mortgage paid off”, which presumably explains the thinking on the bar on anyone with less than €80,000 left on their loans.

An estimated 165,000 homeowners will benefit, the Government says, but that’s just a fraction of the 567,000-odd residential mortgages out there.

The measure is of little use to fixed-rate mortgage holders – the majority – unless they had to refix this year, and also of little use to first-time buyers who have bought their homes this year and will generally be the most stretched homeowners.

Certainly, analysts remain divided on the timing and the structure of the relief. What is interesting is that the mechanics of applying for the relief will force more PAYE taxpayers to familiarise themselves with the notion of filing tax returns. This has been a trend in recent years, not least with the rent tax credit last year. Revenue is gradually moving to a position where all taxpayers will need to file returns.

Given the array of scenarios that readers presented this morning in the Q&A, it is clear that more detail will be required from Government in the finance Bill which is due to be published on Thursday of next week.

The same is true of the landlord tax relief – very carefully named the Rented Residential Relief. An income disregard that will yield €600 for qualifying landlords next year, rising to €800 in 2025 and €1,000 in the following two years, there are certain contradictions in the Government’s own outline of how it works – especially in regard to properties owned by more than one person.

Sticking with accommodation costs, there are a group of people out there renting accommodation who appear only now to have woken up to the €500 rent tax credit – rising to €750 next year – which was designed to ease the plight of tenants facing record high rents in Ireland in recent years.

My colleague Colm Keena wrote in advance of the budget that only half of renters entitled to claim tax back on their monthly outlay are actually doing so, according to figures released by the Revenue Commissioners at the start of the month. Several readers wanted to know when they could apply for a credit that has been available to them for the best part of a year.

It’s tempting to suggest they might not need the money that badly but, given current rents, that is very unlikely. More probable is that the measure has been so poorly promoted by the Government that it is failing to garner the credit due from the measure since it was first announced last year.

Among the sneakiest budget measures was the extension of child benefit. Under the heading of ending child poverty, Minister for Public Expenditure Paschal Donohoe announced that, for the first time, children who are still in full-time education will receive child benefit even if they are 18. Up to now, the €140 a week payment stopped when you turned 18.

Hard-pressed parents of 18 year olds were somewhat chagrined to discover, however, that the measure will only come into force in September of next year, by which time their children will have turned 19 and so will lose out.

The extension of the free book scheme to students up to Junior Certificate level in secondary schools was another widely welcomed measure – though whether that remains the case when parents discover it will not apply to pupils in private schools remains to be seen.

The free books scheme, which was introduced across the State’s primary schools this year, provided funding of close to €100 a head for pupils. It has been a big success, dramatically cutting costs for hard-pressed parents juggling budgets in the ongoing cost-of-living crisis.

The extension to Junior Cycle students had been welcomed and many may have tuned out on hearing that confirmed without catching the final part of the sentence which limited it to students in “recognised post-primary schools within the Free Education Scheme”.

For all that, Budget 2024 is a package that will see almost everyone better off, especially if inflation continues to moderate, as the Government projects it will over the next year.

Whether it will address the big issues of housing and health that have consistently dogged this Government remains to be seen.

You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter, you can read it here.