Terence Flanagan (Dublin North East, Independent)
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61. To ask the Minister for Finance his views on correspondence (details supplied) regarding tax credits; and if he will make a statement on the matter. [15903/15]

Michael Noonan (Limerick City, Fine Gael)
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The decision on the approval of a mortgage for a borrower, which includes interest rate, is a commercial decision for the lending institution concerned. It is important that each lending institution is allowed to assess properly and independently the risks that it is considering when deciding to approve a loan. I do not interfere with such commercial decisions.

Mortgage lending decisions must be undertaken on a sustainable and prudential basis by financial institutions and conform fully to the regulatory requirements, both in relation to the financial institution itself, and also with regard to the safeguarding of the borrower's interests.

While mortgage interest relief is being phased out, it may have relevance to the situation outlined in the details supplied. In Supplementary Budget 2009, it was limited so that interest payable on a qualifying home loan would only qualify for tax relief for the first seven tax years of the life of that loan (7 year rule). However, in Finance Act 2010, it was extended up to the end of 2017 for those whose entitlement to relief was due to end in 2010 or after (i.e. those who purchased in 2004 or after). Accordingly, individuals who took out qualifying loans in the period 2004 to 2012 will continue to be entitled to mortgage interest relief up until the end of 2017.

It should be noted that, where there is an entitlement to mortgage interest relief, it is available at varying rates and subject to certain ceilings. For example, individuals who are in the first seven tax years of their qualifying loan are entitled to a higher interest ceiling, on which the rate of relief is applied. For such individuals, the interest ceilings are €10,000 per annum for a single individual and €20,000 per annum for married couples and civil partnerships. For individuals who have an entitlement to mortgage interest relief and who are in their eighth or subsequent years of their qualifying loan, a lower interest ceiling applies. For such individuals, the interest ceilings are €3,000 per annum for a single individual and €6,000 per annum for married couples/civil partnerships. Therefore, some individuals will experience a reduction in the level of relief they receive as they enter into their eighth and subsequent years of their qualifying loans. However, they will continue to receive mortgage interest relief up until the end of 2017.

The system of mortgage interest relief is designed and targeted in such a way that the relief is of greater value in the early years of a qualifying loan where the interest represents a greater proportion of the repayment. Mortgage interest relief is of lesser value to individuals whose repayments are made up of a higher proportion of principal than interest, as would generally be the case for those who move in to the eighth and subsequent years of their loans. Furthermore, the relief is proportionate to the amount of mortgage interest paid, up to the relevant ceiling. Therefore, the greater the amount of interest payable, the greater the relief available, subject to the previously outlined ceilings for relief.

This Government is very conscious of the significant concerns and difficulties faced by homeowners, not least in relation to their mortgages. In addition, the Government is committed to helping address the particular problems faced by those that bought homes at the height of the property boom between 2004 and 2008. In this regard, in Budget 2012, I announced my intention to fulfil the commitment in the Programme for Government to increase the rate of mortgage interest relief to 30 per cent for first time buyers who took out their first mortgage in that period. A mortgage holder will qualify for the increased rate if they made their first mortgage interest payment in the period 2004 to 2008 orif they drew down their mortgage in that period. As the Deputy will be aware, mortgage interest relief has been abolished for mortgages take out since 1 January 2013.

In the particular case specified, I would have concerns that the introduction of such a credit would merely allow financial institutions to further increase standard variable rates, with the benefit of any tax relief transferring to financial institutions with no net cost reduction for the relevant mortgage holders. Therefore, I am not predisposed towards the introduction of such a tax credit.