Dáil Éireann Debate, Tuesday - 13 June 2023
358. Deputy Richard O'Donoghue asked the Minister for Finance if he will consider putting a plan in place to give interest relief to mortgage holders (details supplied); and if he will make a statement on the matter. [27331/23]
View answerAs I have stated previously in the House, the position is that the formulation and implementation of monetary policy in the eurozone and the setting of official interest rates is an independent matter for the ECB. The Government has no role in setting official interest rates, nor in setting the retail interest rates that lenders may charge on their loans, including mortgages. That is a business and commercial matter for individual lenders.
As the Deputy may be aware, mortgage interest relief for principal private residences was phased out on a gradual basis over the period 2009 to 2020. The decision to abolish it was taken in the wake of the financial crisis, with the cost of the relief being one of the influencing factors. It cost more than €700 million in 2008. Prior to its curtailment and eventual abolition, the top two income deciles in 2005 accounted for close to half of the tax forgone through tax relief. This issue was highlighted in the findings of the 2009 Commission on Taxation report. The relief cost approximately €280 million in 2005.
While I am acutely aware that there have been increases in certain mortgage rates by some lenders, it is important to point out that mortgage interest rates, in particular fixed interest rates, have fallen over the past number of years. For example, in December 2014, the average level of fixed interest rates for new lending was 4.11 per cent compared with 3.44 per cent in March 2023. Furthermore, in March, mortgage rates in Ireland were amongst the lowest in the eurozone.
The data also indicate that a significant portion of new mortgages, 89 per cent in March 2023, are now fixed rate mortgages and this will protect borrowers in the event of a rise in official and market interest rates at least for the period that the interest rate is fixed.
The introduction or reintroduction of mortgage interest relief for principal private residences may not be the best course of action to assist home owners with rising interest rates. For example, there is additional scope for many borrowers, in particular variable rate mortgage borrowers who have built up equity in their home, to look at alternative mortgage options and to reduce their mortgage costs.
The reintroduction of mortgage interest relief, even on a selective or tailored basis, is likely to involve significant costs and needs to be considered, not on an ad hoc basis, but in the context of a range of other cost of living measures being provided.
It should be noted that this Government has responded swiftly and decisively, multiple times, to help to offset the most severe impacts of inflation, with a particular focus on protecting the most vulnerable. Overall, €12 billion in direct relief has been made available to counter the effects of inflation, with the policy response designed to avoid generating second round effects that could lead to an inflationary spiral.
The recent report of the Commission on Taxation and Welfare put forward no case or recommendation for the reintroduction of relief for mortgage interest. Further, the OECD has recommended limiting or phasing out mortgage interest relief on owner-occupied housing.
For all of these reasons, the annual Budget is the appropriate time to decide how the fiscal resources available can best be deployed.
