Homeowners on trackers 'should lose tax relief'
HOMEOWNERS with good-value tracker mortgages should lose their tax relief, the IMF has recommended.
This would be a way for the State to subsidise domestic banks for the huge losses they are making on these mortgages.
Around half-a-million people get mortgage tax relief on 350,000 mortgage accounts, according to Revenue.
The relief was boosted for boom-time buyers soon after the Coalition came to power. Some 270,000 of those who bought between 2004 and 2008 got extra mortgage relief. These homeowners now get up to €1,200 a year for a couple.
But the IMF suggests getting rid of the tax relief for those on low-interest tracker mortgages.
It said those on trackers had benefited from a number of cuts in the European Central Bank rate.
This meant that typical tracker rate customers were paying interest of an average of 1.8pc.
But banks were losing money on the trackers as they could not get money in the markets as cheaply as these mortgage rates.
Some 60pc of the mortgages at AIB, Bank of Ireland and Permanent TSB are tracker rates.
The cost of funding trackers will not ease for banks as long as the ECB rate is so low. It is currently 0.5pc.
IMF officials called on the Department of Finance and the Central Bank to explore options on trackers "to defray potential costs, such as eliminating tax deductibility".
The idea is that savings from taking mortgage tax relief off those on trackers would be used to subsidise the banks for the losses being made on these products, although how this would work is not fully explained in the IMF report.
The report reveals that there is an ongoing project being done by the authorities here to seek solutions to the losses made by banks on trackers.