Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Deputy for his good wishes and I look forward to working with him over the period ahead.

As the Deputy will be aware, 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.

Regarding mortgage interest relief, and as the Deputy will be aware, the 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. It should be noted that, 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 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% compared with 2.48% in November 2022. The Irish average interest rate on new mortgages is now below the eurozone average. In November, Ireland had the third lowest mortgage rates in the eurozone. The differential between the Irish and average eurozone interest rates for new mortgages declined from 1.40% at the end 2021 to -0.27% in November.

I do not intend at this point to introduce mortgage interest relief, but we can have a back and forth on the substance of the issue.

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The data also indicate that a significant portion of new mortgages - more than 93% in November - 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 homeowners 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 homes, to look at alternative mortgage options and to reduce their mortgage costs. In addition, the reintroduction of the relief is likely to be costly. For example, if it was reintroduced and granted at the standard rate of income tax, my Department estimates that it could cost in the region of €560 million per annum. This tentative costing is based on the latest Central Bank data on primary dwelling mortgage accounts and the average interest rate. As the Deputy will appreciate, even the reintroduction of a more tailored or selective form of mortgage interest relief is likely to involve significant costs.

Finally, as he will be aware, the summer economic statement set out the fiscal parameters for budget 2023. A tax package of in excess of €1.1 billion was announced in budget 2023, which included a substantial income tax component. The budget also included a substantial cost of living package and a large range of one-off measures to assist households with cost-of-living pressures. I have no plans, therefore, to reintroduce mortgage interest relief at this time. It should also be noted that the recent report of the Commission on Taxation and Welfare put forward no case or recommendation for the reintroduction of relief for mortgage interest.

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