Cut in mortgage interest relief will reduce tax gains
Tens of thousands of families will see the benefits from cuts in the USC and income tax rates severely reduced by the abolition of mortgage interest relief.
Almost 300,000 mortgage holders will be hit with higher monthly repayments after the Government confirmed it is abolishing the relief, which provides a tax break based on the interest charged by banks for mortgages.
The relief, which applies to home loans taken out between January 2004 and December 2012, will be phased out by 2020, adding to monthly outgoings.
It was originally due to be abolished entirely after this year, but will now be retained for the next three years. The relief ceased for new mortgage borrowings with effect from 2013.
However, despite being retained, a reduced rate of 75pc will apply for 2018, falling to 50pc in 2019 and 25pc in 2020 before it is scrapped. Around 292,000 mortgage accounts currently benefit from the relief. The average benefit is some €600, and higher in some cases.
Scrapping it immediately would add €160m to mortgage repayments, Fianna Fáil's finance spokesman Michael McGrath said, which would push some families into arrears.
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The decision to taper out the relief, rather than scrap it immediately, was hailed as a victory by Fianna Fáil, which pushed for it to be phased out over time.
"For many individuals and families, servicing the mortgage on their home is the largest outgoing in their monthly budget," Mr McGrath said.
"Under existing law, mortgage interest relief is due to end completely for all mortgage holders at the end of December this year.
"If this were allowed to happen, mortgage bills would increase by some €160m per year - with many individuals and families facing a sizeable increase in their mortgage repayments.
"Thousands of mortgage holders would receive an unwelcome shock and I have no doubt it would push some into arrears."
Separately, the Government increased funding for the Mortgage to Rent Scheme to €22m. It is designed to allow those in arrears to remain living in their homes. Some 250 households are expected to benefit next year.