Michael McGrath (Cork South Central, Fianna Fail)
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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 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.

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. The relief cost approximately €280 million in 2005, rising to more than €700 million in 2008. 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.

While I am acutely 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 per cent compared with 3.54 per cent in April 2023. Furthermore, in April, mortgages rates in Ireland were amongst the lowest in the eurozone.

The data also indicate that a significant portion of new mortgages, 89 per cent in April 2023, are now fixed rate mortgages and this will protect borrowers, including first time mortgage holders, in the event of a rise in official and market interest rates at least for the period that the interest rate is fixed.

The reintroduction of mortgage interest relief, even on a selective or tailored basis is likely to involve significant costs and needs to be considered, not on an ad hoc basis, but in the context of a range of other cost of living measures being provided.

It should be noted that this Government has responded swiftly and decisively, multiple times, to help to offset the most severe impacts of inflation, with a particular focus on protecting the most vulnerable. Overall, €12 billion in direct relief has been made available to counter the effects of inflation, with the policy response designed to avoid generating second round effects that could lead to an inflationary spiral.

The recent report of the Commission on Taxation and Welfare put forward no case or recommendation for the reintroduction of relief for mortgage interest. Further, the OECD has recommended limiting or phasing out mortgage interest relief on owner-occupied housing.

For all of these reasons, the annual Budget is the appropriate time to decide how the available resources can best be deployed to support different groups.