PROPERTY:MORTGAGE INTEREST tax relief has been extended for borrowers who bought their homes at the peak of the property market, while the moratorium on legal proceedings against borrowers in arrears could be extended to 12 months, Minister for Finance Brian Lenihan said yesterday.
The move on tax relief means that first-time buyers who are within the first seven years of their mortgage and are currently eligible for relief will continue to receive it until 2017.
Mr Lenihan said the change was intended “as a support to homeowners who now find themselves in negative equity”.
Qualifying loans taken out by first-time buyers before July 1st, 2011, will continue to receive tax relief at the current levels for seven years. Transitional arrangements will apply to loans taken out in the subsequent 18-month period.
The Minister said it was his intention to abolish mortgage interest relief entirely by the end of 2017.
The Minister added that a review of the Mortgage Interest Subsidy Scheme, intended to help families having difficulty paying their mortgages, would be completed “early in the New Year”.
Mr Lenihan said he had asked the Financial Regulator to examine the possibility of doubling the six-month moratorium on legal proceedings in the case of mortgage arrears to 12 months.
“I will require the banking industry to engage with Government to find innovative solutions to ease the burden for affected home owners,” the Minister said.
Housing group Threshold welcomed the possible extension of the moratorium, saying it “offered some immediate relief to those in repayment difficulties”.
However, its chairwoman, Aideen Hayden, said it would be “more realistic and helpful” if local authorities were to put in place a fund to assist people in difficulty.
The property tax recommended by the Commission on Taxation will go ahead, Mr Lenihan indicated. However, “considerable groundwork” will have to be done before this site valuation tax can be implemented.
“Work will shortly begin on the registration of ownership and valuation of land,” the Minister said.
The Construction Industry Federation was among those to welcome the continued availability of the mortgage interest relief. However, it criticised the Government’s decision to cut “construction-intensive elements” of the capital investment programme.
Federation director Tom Parlon said a €15 billion reduction in the capital budget for 2010-2013 would see school building, social housing, water services and transportation projects cancelled, putting 100,000 jobs at risk.
There was mixed reaction from other property sector groups. Property consultants Knight Frank welcomed the measures for first-time buyers and borrowers in arrears, but said it was “unhappy” that the Minister had “introduced a note of uncertainty” by announcing plans for a property tax without indicating how it will be applied. “This may act as a further brake to purchasing decisions until the actual details of this tax become more transparent,” the company said.
Paul Murgatroyd, economic consultant to MyHome.ie, the property website owned by The Irish Times, said he was disappointed that the Government had not reduced stamp duty. He described this as a “missed opportunity”.
