The Government does not plan to introduce mortgage interest relief, Tánaiste Leo Varadkar has said, as the European Central Bank (ECB) increased its lending rate again on Thursday.
Mr Varadkar said it wasn’t something the Government would rule out for the future but added “there are no current plans” to do so and that it would involve reopening the Budget.
The Tánaiste was responding to Sinn Féin deputy leader Pearse Doherty in the Dáil on Thursday, who said the Government should call on banks to “do the right thing” and absorb the interest rates “in the interest of their customers”.
The Donegal TD also said the Government needed to introduce a “targeted, tailored, time-bound mortgage interest relief for struggling mortgage borrowers who ... will face sharp increases in terms of interest hikes”.
Borrowing costs for mortgage-holders look set to rise again after the ECB increased its main lending rate by another half a percentage point. The latest ECB interest rate hike, the fourth this year, means interest rates have now jumped from zero to 2.5 per cent in just six months.
Mr Varadkar said he hoped the increase in interest rates by the ECB will be the last one “or the second last one”.
He said the ECB was independent in its functions and had a particular remit to bring inflation under control, to around two per cent, “and that is the reason why interest rates are being increased by the Central Bank to bring inflation under control”.
“But obviously this is going to be extremely unwelcome news for mortgage holders and indeed other borrowers, who will see the cost of their repayments rise,” Mr Varadkar said.
“That’s coming at a time when the cost of everything is rising. I know it’s going to be very unwelcome news and very difficult for a lot of families and other borrowers in the period ahead.
“We don’t have any plans at present to reintroduce mortgage interest relief. It did exist in the past. What existed, generally speaking at a time when interest rates were much higher than even they are now.
“It’s not something we will rule out for the future, but there are no current plans to do so and it would involve reopening the budget and all of the consequences that would derive from that.”
The Tánaiste said his message to the banks was that they shouldn’t use rising interest rates as an opportunity to increase profit margins.
“That is the message that we will convey to the banks with regard to interest rates and it had been the case for a very long time that interest rates paid by Irish borrowers were very much higher than the European average,” he said.
“We have seen that narrow in recent months because a lot of the banks haven’t passed on the increases and I think that is welcome.”
