Missing the target: the Irish government’s mortgage interest relief scheme
Dublin: The government’s initiative, unveiled in last year’s budget to assist those grappling with heightened interest rates, has been deemed ineffective by a report from the Central Bank.
According to the report, the purported benefits of the scheme have largely accrued to a select few, prompting the Central Bank to urge the finance department to reevaluate the programme to ensure its efficacy for the intended beneficiaries. Notably, the analysis highlighted the exclusion of young individuals eligible for substantial repayments.
The scheme primarily favours homeowners aged over 40, particularly those with tracker mortgages, who have encountered relatively fewer challenges in meeting their mortgage obligations. However, these beneficiaries do not typically fall within the low-income bracket. Critically, the scheme fails to offer relief to individuals burdened by exorbitant interest rates exceeding 6 percent.
Participants in the scheme are required to make only nominal repayments, with the report indicating that they do not bear a significant debt burden relative to their income.
With an annual expenditure of €120 million on the mortgage interest relief scheme, recent projections suggest a potential increase in costs. Consequently, the withdrawal of the announced aid scheme would pose considerable challenges for the government. Therefore, the Central Bank advocates for a revision that targets mortgage holders facing interest rates exceeding six percent.
Furthermore, the report cautions against providing unnecessary tax breaks to mortgage holders, warning that such measures could inflate housing prices. The Central Bank emphasises that reliance on mortgage interest relief and other government initiatives, such as Help to Buy, could pose risks to the housing market.
Additionally, the Central Bank warns that the scheme may incentivize lenders to raise interest rates, ultimately benefiting lenders’ profits at the expense of taxpayers. Instead, the report recommends leveraging the social welfare system to directly assist those in need, effectively targeting disadvantaged individuals while addressing underlying market issues.
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