FG likely to abandon pledge on €166-a-month tax credit for homeowners
PLANS to give all boom-time house buyers an extra €166 a month in mortgage support have been shot down by a key government report.
And there were indications last night that the Government will heed the recommendation.
It means it will perform a U-turn by abandoning this key commitment that was made in the programme for government.
But around 10,000 mortgage holders who are at risk of losing their homes look set to benefit from new secret deals that will see county councils and charities taking ownership of their homes.
The families will be able to remain in the houses and will pay rent instead of mortgage payments.
The rent amount will be a fraction of the market rental rate, and far less than their mortgage payments.
Their neighbours will not be aware that ownership of the property has been taken over by the local authority, a government report on mortgage arrears outlines. But there will be no blanket debt forgiveness for mortgage holders, as it would cost €14bn alone to put homeowners back in a situation where they owe less on their homes than they borrowed to buy them.
Even a more targeted approach for those who took out mortgages between 2006 and 2008 would cost about €10bn.
These people have been dubbed the negative-equity generation, as they owe more on their homeloans than their homes are worth.
And the mortgage report dismisses suggestions that those in negative equity should have some of their mortgage debt written off.
"A blanket debt or negative-equity forgiveness scheme would not be an effective use of state resources and would not solve the problem," the report says.
The report, from a group of civil servants and chaired by accountant Declan Keane, stated that the "vast majority of mortgage holders can and must continue to meet their mortgage commitments and indeed any other debt obligations".
Just because a person is in negative equity, it does not follow that they cannot pay their mortgage, the report states.
Only between 10pc and 13pc of those in negative equity are in arrears on their homeloan payments.
The Government had initially committed to giving extra mortgage tax relief to "boom-time buyers" by the summer.
But this was then delayed until this December's Budget.
The measure was to have seen a couple with a large mortgage get total payments of around €500 a month in mortgage tax relief.
Yesterday's report says such a scheme would be unfair.
"The proposal. . . would give benefits to all who took out mortgages in the relevant years, regardless of their economic circumstances," the Keane report states.
Government sources indicated last night that it was unlikely that there would now be any extra tax relief for the negative-equity generation.