Michael Noonan (Limerick City, Fine Gael)

Mortgage interest relief is available in respect of qualifying interest on a qualifying loan in respect of a qualifying residence. A qualifying loan is a loan used for the purchase, repair, development or improvement of an individual's principal private residence. The relief is provided at source through financial institutions. This means that the mortgage holders get the benefit of the relief directly from their mortgage providers in the form of reduced monthly repayments which take account of the tax relief.

The cost of mortgage interest relief is a significant burden on the Exchequer. At its peak in 2008 mortgage interest relief cost the Exchequer €705 million. It is estimated that the cost of mortgage interest relief was €457 million in 2011.

It is acknowledged that the early years of a mortgage are the most difficult for mortgage holders. Therefore, since 1993, mortgage interest relief has been focused towards first-time buyers, granting this cohort a higher rate of relief, as it was considered that these mortgage holders were most in need of assistance. In the supplementary budget of 2009, mortgage interest relief was entirely focused on mortgage holders who were in the early years of their mortgages. Mortgage interest relief was ceased for mortgage holders who had already received mortgage interest relief for seven years or more.

In line with the commitment in the programme for Government, mortgage interest relief was increased in budget 2012 to 30% for first-time buyers who purchased their first homes between 2004 and 2008. This measure was intended to help mortgage holders who purchased at the peak of the housing market. The Government also reversed the previous Government's decision to reduce the rates and ceilings of mortgage interest relief for those purchasing in 2012. The previous rates are maintained at 25% for first-time buyers, reducing to 20% on a sliding scale, and 15% for non-first time buyers. Anyone currently qualifying for mortgage interest relief or who purchases in 2012 will receive the relief up until the end of 2017. These measures will cost in the region of €55 million per annum. Mortgage interest relief will not be available for new loans from 2013 and it is set to be abolished altogether from 2018. Further technical details will be set out in the Finance Bill to be published later this week.

When any time-limited measure is introduced, there is always pressure from individuals, falling outside the scope of the measure, for it to be extended to them, for example, individuals who purchased in 2003. However, it is necessary to choose a cut-off point as otherwise the measure will become untargeted and very costly. It is evident that house prices increased significantly during the period 2004 to 2008. As the Deputy will appreciate mortgage interest relief is most valuable to mortgage holders in the early years of the mortgage, when the interest makes up most of the repayment.

I am aware that some mortgage holders have pointed out that they are not eligible to benefit from the new measure, despite having purchased in the period, because they have rented out their homes. While these individuals are not eligible for mortgage interest relief, because it is not now their principal private residence, they would be entitled to a 75% mortgage interest tax relief against the rental income from this property.

Mortgage holders who find themselves in difficulty may qualify for mortgage interest supplement. This is a means-tested payment made by the Department of Social Protection to provide short-term support to help pay mortgage holders' interest repayments.

Finally, it should be noted that the Central Bank's code of conduct on mortgage arrears governs the relationship between lenders and borrowers who are in arrears and contains a number of important protections for borrowers. It has established a mortgage arrears resolution process for handling cases in arrears and dedicated arrears support units and appeals processes. The code of conduct also provides that a lender must not apply to the courts to commence legal action for the repossession of a borrower's private residence until every reasonable effort has been made to agree an alternative arrangement with the borrower.

Mortgage interest relief is available only in cases where mortgage interest is being paid. Therefore, I appreciate that the current relief is not going to help those in arrears. As I have mentioned, other solutions are available for this category of mortgage holders.

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