Home buyer's perk going -- and soon it could be gone
MORTGAGE interest relief may be abolished because of falling house prices and lower interest rates.
The tax relief on monthly mortgage interest payments will only apply for the first seven years after a person buys a property for use as their home.
Finance Minister Brian Lenihan yesterday said the move was justified because of the "significant" reduction in house prices and interest rates.
And he said that the Commission for Taxation, due to report at the end of the year, could decide to abolish the tax break.
"The relief will now be targeted on those who bought their homes when prices were at their peak," he said.
"It will also support those who now wish to move, improve or buy for the first time. As house prices fall, the provision of mortgage interest relief will be kept under review with a view to eventual abolition."
The move will save the Government €96m this year and €128m in a full year by restricting the relief for homeowners to seven years.
Under the 'old' system, mortgage interest relief is offered to anyone paying interest on a mortgage for seven years after the money is drawn down. The amount varies from 25pc of the interest paid to 20pc at the end of seven years. After that period, a standard rate of 15pc applies. But from May 1 the relief will stop after seven years.
A number of buyers who purchased at the height of the market will still be paying significant interest long after the seven-year threshold. Also, while interest rates are at a historic low, they are likely to rise.
Anyone who has been receiving interest relief for the past seven years will no longer be eligible after May 1.
Edward Carey from the Irish Auctioneers and Valuers Institute said the move would have an "obvious" impact on sales.
"A vibrant property market is going to need a vibrant economy," he said.
"It's going to have an obvious impact on a property buyer servicing their mortgage.
"The guy on the average industrial wage has seen benefits taken from him."
- Paul Melia
