Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

A limited form of income tax relief is available to certain taxpayers for interest payments on a qualifying mortgage loan, as set out in section 244 of the Taxes Consolidation Act 1997. The relief has expired for mortgages taken out prior to 2004 and ceased for new borrowings from January 2013. This mortgage interest relief is, therefore, only available on qualifying mortgage loans taken out between 2004 and 2012 and is being phased out for the remaining recipients on a tapered basis to alleviate the potential financial difficulties of the cliff that may arise if the relief was removed in a single year.

The rate in 2018 is 75% of the rates that applied in 2017, namely, 15%, 20%, 22.5%, 25% and 30%, with the application of these rates depending on an individual’s circumstances. The rate of relief will be reduced to 50% of the 2017 relief in 2019, and 25% of the 2017 relief in 2020, as legislated for in last year’s Finance Act. In 2018, the estimated cost of mortgage interest relief is €124 million, reducing to €78 million in 2019. If the 2018 rates and qualifying interest levels continued to apply from 2019, as the Deputy has suggested, the cost would be an additional €46 million per annum.

There were 292,448 mortgage holders in receipt of this relief in 2015, including those who purchased at the peak of the property market and also those who bought during the subsequent trough. There is, therefore, an equity issue around any further retention of the relief in the current form beyond 2021 as not all mortgage holders can avail of the relief. The decision to abolish mortgage interest relief was prompted by the view that relief effectively becomes priced in to the purchase price of the property. Research by the ESRI contends that demand side oriented tax incentives that target home buyers are likely to result in increased house prices, with a limited increase in supply and, thus, the home purchaser is unlikely to be a net beneficiary.

For these reasons, I am not in a position to commit further resources to continuing the relief beyond the current end date, let alone extend it in the way the Deputy has suggested. Therefore, I cannot accept the amendment.