The Government has no plans to reintroduce tax relief on mortgage interest, Tánaiste Leo Varadkar has said, as the European Central Bank raised interest rates for the fourth time in six months.
The half percentage point increase in ECB rates announced on Thursday will mean a further rise in mortgage payments for around 300,000 homeowners who are on tracker mortgages just as they are juggling Christmas bills.
It also increases the prospects of higher mortgage bills for property owners on other types of mortgage in the new year.
ECB interest rates have now jumped from zero to 2.5 per cent since last July. However, the latest increase is less dramatic than the three-quarter point hike announced in October, suggesting inflation across the bloc may be showing signs of peaking. However, in its statement, the ECB said interest rates are likely to rise further in the new year.
For those with €200,000 remaining on their mortgage, the ECB’s latest 0.5 percentage point rise will add about €45 a month to repayments. However, when all increases since July are taken into account, the increase is about €220 a month or more than €2,600 a year.
Sinn Féin deputy leader Pearse Doherty said the Government should call on banks to “do the right thing” and absorb the interest rates
Mr Varadkar said tax relief on mortgage interest was not something the Government would rule out for the future, but added that “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, who said in the Dáil on Thursday that 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”.
Mortgage interest relief was phased out in Ireland from 2013 and has not been available at all for the past five years.
The main lenders have not increased their variable interest rate mortgages since the ECB started ratcheting up rates in the summer. However, that is expected to change.
“Those on variable rates will also likely see an increase in their repayments over the coming week. The main lenders have not yet hiked their variable rates in response to any of the previous ECB increases. However, it’s hard to see this remaining the case for much longer,” said Daragh Cassidy, of price comparison website Bonkers.ie.
In terms of fixed rate mortgages, since July AIB has hiked its fixed rates by only one percentage point compared to the 2.5 point increase imposed by Frankfurt. PTSB has increased its fixed rates by an average of 0.45 percentage points and Bank of Ireland has added just 0.25 of a percentage point to its fixed rates.
“Today’s news almost guarantees that all three lenders will hike their fixed rates again in the new year,” Mr Cassidy said.
