Almost 38,000 first-time buyers who borrowed to buy homes during the peak years of the boom have yet to receive full mortgage-interest tax relief almost a year after the benefit was introduced due to the computer problems at Ulster Bank last summer.
Of 132 mortgage lenders in the country, Ulster Bank will be the last to pass on the increased mortgage tax relief introduced to ease the burden on certain first-time buyers with large mortgages.
Minister for State at the Department of Finance Brian Hayes described the delay and the fact that the problem would continue until the end of March as “most disappointing”.
“Unfortunately, Ulster Bank has recently informed Revenue that it will not now be able to fully complete the necessary IT upgrades until March,” Mr Hayes told the Dáil.
The Government introduced a 30 per cent mortgage-interest relief rate in the budget last December. It is aimed at first-time buyers who had borrowed to buy homes between the start of 2004 and the end of 2008.
Not up to speed
The measure was aimed at helping 189,011 mortgage holders but the relief is offered “at source” by the lenders through the sharing of electronic information with the Revenue Commissioners.
Lenders were able to offer customers an interim rate of 25 per cent as this rate was already part of the mortgage-interest relief system. Applying the higher 30 per cent rate, however, required changes to IT systems at the lenders and the speed of upgrading their systems was not uniform.
The Revenue had upgraded its computer systems by last December. By May, 109 lenders covering 107,664 cases or 57 per cent of the people entitled to the benefit had received the 30 per cent relief five months after the budget.
The Dáil was told that Ulster Bank was the only lender that had not implemented the change covering 20 per cent of those entitled or 37,866 mortgage holders.
Mr Hayes said the problems this particular lender had with its IT systems this year are well known and have been described and discussed in the media throughout the year.
Ulster Bank said the 30 per cent rate would be applied to all eligible cases by the end of March and that the delay was caused by the “technical incident over the summer”.
Technical glitch
A technical glitch in the bank’s computer systems in June shut 750,000 customers out of the accounts for about a month. The bank has paid out €52 million in compensation to Irish customers over the error, which has cost the bank about €103 million in total.
The UK-owned lender said that eligible customers would be paid the additional 5 per cent difference direct to the mortgage account in the first half of December.
“All customers will shortly receive written confirmation and details of their specific transaction,” the bank said.
The bank said it would consider whether to compensate customers for the delay in the introduction of the higher tax relief rate on a “case-by-case basis”.
Fine Gael TD Paschal Donohoe, who raised the issue in the Dáil after being contacted by a constituent who was affected, expressed surprise that it took the lenders so long to offer the relief.
The Revenue has said that once the necessary software is in place in the lenders, it will grant the additional 5 per cent tax relief retrospectively.
