Government set for Help-To-Buy scheme U-turn
The Government looks set to significantly cut the upper threshold on its controversial first-time buyers' package after it was labelled a "mansion grant" by Fianna Fáil.
On the back of both political and industry pressure, ministers are preparing a series of changes to the Help-To-Buy scheme, one of the key planks of Budget 2017.
Sources said the €600,000 threshold will be cut to between €450,000-€500,000 in a move that will be labelled a climbdown by Housing Minister Simon Coveney.
However, this is unlikely to happen today when the Government publishes the Finance Bill - which contains the taxation measures as part of the Budget.
Fianna Fáil's housing spokesperson Barry Cowen reiterated last night that his party would reserve judgement on elements of the Finance Bill until changes are introduced.
The Offaly TD has called for the threshold to be capped at €400,000.
One source said Mr Coveney has indicated privately that he would be willing to introduce changes.
"It looks like they will let the €600,000 threshold go. It may be reduced to low as €450,000," the source told the Irish Independent.
Such a move is likely to gain significant political support.
Meanwhile, the Irish Independent understands Finance Minister Michael Noonan will announce changes to the rules surrounding the loan-to-value ratio (LVR).
This refers to the percentage of the price of your home that you are borrowing from a financial institution.
Under current arrangements, those buying a house for €200,000 are required to take out a mortgage of €160,000, or 80pc of the value of the property, before they qualify for a tax rebate under the new scheme.
However, the Government will reduce this to 70pc following a recommendation from the Central Bank.
Government sources said the Central Bank's research showed the average first-time buyer has a LVR of 78.7pc, meaning they would not qualify for the rebate.
Central Bank officials are believed to have warned that the previous 80pc rule was encouraging first-time buyers to take out a larger mortgage than they needed.
This created the fear that couples were taking on more debt than necessary.
It is hoped that by changing the thresholds, more first-time buyers will avail of the scheme, while at the same time addressing debt levels.
The first-time buyers' scheme itself is based on home-buyers being eligible for a tax rebate at a rate of 5pc.
The relief is capped at €20,000 and will be based on income tax paid over the previous four tax years.
Meanwhile, today's Finance Bill will also contain a series of measures in relation private equity firms, more commonly known as vulture funds.
TDs, such as Wicklow's Stephen Donnelly, have claimed in the Dáil that these funds are avoiding paying tax by using so-called Section 110 status.
Mr Noonan will today announce further plans to restrict the activity of vulture funds.