Worst-hit mortgages suffer new tax blow
Published 10/12/2012 | 05:00
HOMEOWNERS already struggling with their mortgage repayments have been dealt a new blow by the taxman.
Revenue officials have ordered banks to stop mortgage interest relief for households more than six months behind on their payments.
The relief is worth up to €4,000 a year for a couple in cases where both partners are named on the mortgage.
Now fears are mounting that thousands of households will be denied the tax relief, which can substantially lower monthly repayments, especially for those who bought during the boom. Around 65,700 residential mortgage accounts are six months or more in arrears.
A spokeswoman for the Revenue Commissioners told the Irish Independent that where no payments have been made on a mortgage for six months or more the taxman has now ordered that the valuable mortgage tax relief be removed.
"Where no payments have been made for six months, the relief is ceased," the spokeswoman said.
"In the event of resumption of payments, then the relief can be restored following three consecutive payments."
Mortgage tax relief is a payment made to the banks of mortgage holders who qualify. It goes to the lender, with the bank then using the money to reduce the monthly payments.
Around 350,000 households are getting the relief. Those who meet the criteria and buy a house will still qualify for it if they buy before the end of this month. The relief lasts seven years.
A couple with a €300,000 mortgage on an interest rate of 3.5pc could be getting €2,100 in relief a year. For bigger mortgages, the relief that can be claimed is capped at €4,000.
Last year, the Government gave extra mortgage tax relief to those who bought during the boom, with the additional relief worth up to €2,000 a year.
But now Revenue has written to all mortgage lenders telling them to take the relief off of anyone who has not paid their mortgage for six months or more.
A spokeswoman for Revenue said: "In light of increasing non-payment or arrears of mortgage payments, and to protect the Exchequer where clearly eligibility no longer exists, Revenue advised lenders in October that relief should be calculated by the interest-paid method only."
This means tax officials will only allow the relief for mortgage holders who are paying the interest on their home loan.
Until recently, it was enough for a mortgage holder to be charged interest on their mortgage to qualify for tax relief.
Consumer advocate Brendan Burgess questioned if it was worth Revenue's while to go after people who the tax officials regarded as no longer entitled to mortgage interest relief.
Mr Burgess, who founded the www.askaboutmoney.com website, said not all of those who were six months or more in arrears would lose their mortgage interest relief.
This is because those who missed six months of payments may have since reached a deal with their bank to pay back some money each month.
Paul Joyce of the Free Legal Advice Centres (FLAC), an organisation that helps people in mortgage distress, said the Revenue move was a new blow to struggling homeowners.
"This is another nail in the coffin for those who are finding it hard to meet their mortgage payments," he said.
Only those who have struck a deal with their bank on repaying some money, and hold to the arrangement for a year, will now qualify for mortgage interest supplement, said Mr Joyce.
Meanwhile, Permanent TSB is caught up in nearly 500 legal cases involving troubled mortgage holders.
The bank has told the Department of Finance that most of the cases relate to "debt recovery" and enforcement.
The figures only cover cases currently active, and do not include cases that have been settled.
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