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

I thank Deputy Doherty for raising this issue. 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 ECB. The Government has neither a 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 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, for example. 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 €289 million in 2005.

While I am acutely aware that there have been increases in a number of mortgage rates offered by 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 2.83% in February 2023. The Irish average interest rate on new mortgages is now below the eurozone average and in February, Ireland had the third-lowest mortgage rates in the eurozone for new mortgages. The data also indicate that a significant portion of new mortgages, 93% in February 2023, are now fixed-rate mortgages and this will protect borrowers in the event of a rise in official and market interest rates 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.

I see the clock has begun to tick, so I will conclude by saying that for all these reasons, it is my own view that the annual budget will be the appropriate time to decide how scarce resources can best be deployed to support different groups of people including mortgage holders, renters, workers and people who are on fixed incomes. I know we will have a considerable debate over the next number of months about what the correct balance is on the package moving forward.

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