Dáil Éireann Debate, Thursday - 5 October 2023
78. Deputy Pearse Doherty asked the Minister for Finance if he will introduce temporary and targeted mortgage interest relief to support struggling households with rising mortgage costs; and if he will make a statement on the matter. [43390/23]
View answerIn the past 15 months, the European Central Bank, ECB, has increased its key lending rate ten times. The Minister knows now that many households are feeling the sudden, sharp increases in the mortgage crisis. For many it is a massive income shock. As we know, this has happened in the context of the wider cost-of-living crisis. Will the Minister commit to introducing temporary and targeted mortgage interest relief in next week's budget to support those families? Many of them, as the Central Bank has said, are paying above €3,000 more in interest rates this year compared to last year, with 20% paying an average of €5,700 more.
I thank Deputy Doherty for his question. As 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 European Central Bank. 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 will be aware, mortgage interest relief for principal private residences was phased out on a gradual basis over the period of 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 successive 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 last number of years. For example, in December 2014, the average level of fixed interest rates for new lending was 4.11% compared with 4.04% in July 2023. The data also indicate that a significant portion of new mortgages, around 85% in July 2023, are now fixed-rate mortgages. 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 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. I have consistently said that I think the appropriate time to consider the introduction of mortgage support for people who are carrying the burden of successive interest rate increases is in the context of the budget.
This has been going on now for 15 months. The ECB has said very clearly that one in five mortgage holders have seen their mortgage interest increase by €5,700 on average since last year and one in three is paying €3,000 more than last year. We have come up with a proposal that would take 30% of that increased mortgage interest into the State's coffers and where it would be paid for by the State, up to a maximum of €1,500. We have asked the Minister to come up with a proposal for over a year now and he has not. This is a far cry from where he used to be. In 2018, he put this on the Dáil record:
In the 2016 general election Fianna Fáil was the only party of which I am aware that campaigned on the basis that mortgage interest relief would be retained and provided for in the budgetary and fiscal projections made at the time.
He said "I would have loved to have seen it retained at a rate of 100%" but this was the best he could negotiate with Fine Gael. Does the Minister know what the ECB interest rate was when made those comments? It was 0%. It has increased now ten times. The ECB interest rate has never been as high in the history of the State and ordinary people are being crucified with high interest rates and the Minister is coming up with nothing. I ask him again, on behalf of all those individuals, some of whom are now in the claws of the vulture funds, which the Minister's party and Fine Gael supported, what is he going to do? Is he going to ignore the commitment he made last time? When interest rates were 0% he was arguing for mortgage interest relief. When interest has never been as high in the history of the ECB, he is saying people should paddle their own canoe. It is not acceptable.
For factual accuracy, as the Deputy well knows, when we advocated in opposition for an extension of mortgage interest relief it was in the context of the confidence and supply agreement we had. The relief was about to be phased out and we negotiated an extension of mortgage interest relief and it remained in place for longer than it otherwise would have. That is the fact of the matter, as the Deputy knows well.
We are five days out from budget day and it is undoubtedly the case that there will be a very sharp focus on the cost of living generally in the budget next Tuesday. The Minister for Public Expenditure, National Development Plan Delivery and Reform, Deputy Donohoe, and I are working very hard on a range of measures, both on the expenditure side and on the taxation side, to provide support to households that have been carrying a high burden over the past number of months. The Government has not been found wanting so far. We have brought forward about €12 billion worth of measures since the beginning of last year. When it comes to individual budgetary initiatives, that is a matter for next week. When we look at what was done last year, we believe much of it worked well and provides a template for further decisions that the Government can confirm next week. We are acutely conscious of the costs families are facing, costs which are unavoidable when it comes to energy, transport and mortgages. The Government will be making decisions next week to provide as much support as we possibly can within the constraints we have.
The reality is that the Government has been found wanting in relation to mortgage interest relief. For the last year, as letter after letter landed in the letterboxes of families across the State, month after month, with ten letters now telling them that their mortgage interest rate has gone up if they are on a tracker mortgage, the Minister has come forward with nothing.
There are no proposals and there is nothing to support these families in the form of mortgage relief, and that is not acceptable.
In 2016, when interest rates were zero, the Minister argued for mortgage interest relief at a rate of 100%. We are arguing for a rate of 30%, with a cap of €1,500, at a time when mortgage interest rates have never been as high at ECB level. Why has the Minister decided to abandon these homeowners now? Why has he decided, now that he is in the driving seat, not to believe in what he was arguing in 2016, when interest rates were zero? It makes no sense. Interest rates were zero, the Minister was arguing for 100% relief and he wanted it continued for a longer time, but he was not able to negotiate that. Interest rates are now 4.5%. People in this State are paying interest rates of up to 10% because they are in the claws of the vulture funds, and the Minister is coming up with nothing. Why has he U-turned on his position?
Again, as the Deputy knows well, when my party was in opposition, we used the influence we had at the time to secure an extension to mortgage interest relief, but that ended a number of years ago. It is undoubtedly the case that the ten successive ECB rate increases are placing a real burden on households throughout the country. I am not into rhetoric or political declarations; I am into finding solutions and helping families with the costs they have. We have been very active on the issue of supporting families who are facing high mortgage costs, with extensive engagement with the banks, the non-banks and Banking and Payments Federation Ireland, agreeing a new protocol and a new set of parameters for mortgage switching, which has been welcomed widely. We have also engaged directly with individual non-banks to put in place new solutions for customers.
Our response in the round to the high inflation, high energy costs and high interest costs people are facing will be set out in a cohesive and comprehensive form next Tuesday in the budget, as is appropriate.
