Budget 2024 provided mortgage interest relief to those affected by rising interest rates. We go through everything you need to know about the new measure.
Who can apply?
Anyone who has seen their mortgage payment increase in 2023 compared to last year can apply for the relief.
So this will largely be people on trackers and variable rates. However if you were on a fixed rate and re-fixed at a higher rate in 2023 then you can also get the relief.
Those whose loans have been sold to 'vulture' funds and who cannot move lender and who have seen their rates go as high as 8% or 9% in some cases i.e. the so-called 'mortgage prisoners’ will also benefit.
However you don’t have to be in financial distress to apply for the relief or even show that you’re struggling with your mortgage payments. You just have to show that your payment has gone up.
You can only apply for the relief on your main home - it doesn't apply to any rental properties, holiday homes or second homes you may have.
And the relief will only apply to those with a mortgage balance of between €80,000 and €500,000. If your mortgage balance is less than or greater than this, you can’t apply.
How much can I apply for?
Tax relief of 20% is available on the increase in the interest paid on a mortgage between the end of 2022 and 2023, up to a maximum of €1,250.
In other words, the maximum amount anyone can possibly get back is €1,250 - though the Government says the average amount will be just under €800.
As the European Central Bank (ECB) started hiking rates in July of last year, it does technically mean that you can’t claim interest on the full increase in rates that you've experienced.
Can you give me an example?
Let’s say your mortgage repayments came to €15,000 in total in 2022.
At the end of 2023 your repayments for the full year came to €18,600 in total - or a difference of €3,600.
You can then claim tax relief at 20% on the €3,600 difference, meaning you'll get €720.
How do I claim the relief?
To claim the relief, you’ll have to file a tax return through Revenue’s online service and you’ll be asked to upload mortgage statements for 2022 and 2023.
The best time to do this is probably early January when you can also apply for any other relief that you may be due e.g. medical expenses and tuition fees. Find out more about all the reliefs available here.
You’ll then receive a credit which will be offset against your tax liability for 2023. And presuming you don't owe Revenue money, the funds will then be paid into your account within a few days.
To claim the relief you must also be compliant with Local Property Tax requirements.
I don't pay tax - will I qualify?
No. This is a tax relief scheme so if you're not paying any tax (your only income is social welfare for example) then you don't qualify.
How long will the relief be available?
At the moment the relief will only operate for one year. There's no indication that the relief will be available in 2024 but this may be revised if rates continue to increase next year. You can read our outlook on where rates are heading here.
Wasn't there previously a mortgage relief scheme?
There was but mortgages taken out after 31st December 2012 didn't qualify and it stopped being paid to all qualifying mortgage holders in 2021.
Is the mortgage relief fair?
Tracker customers will be one of the main beneficiaries of the relief.
Yet tracker customers have enjoyed rock-bottom interest rates for many years. Depending on the margin they were paying, they could have been on a rate as low as 0.60% or 0.70% since 2014, while everyone else was paying around 3% or 4%. It is only over the past six months, if even, that tracker customers are paying rates that are higher than everyone else.
The entire point of a tracker is that your rate can go up or down. Tracker customers had a great run of things for many years. So it might seem unfair to some that the Government is rushing to help them the second rates increase.
Until very recently, Irish mortgage rates were among the highest, if not the highest, in all of the Eurozone. Partly because everyone else had to subsidise the ultra-cheap, near loss-making trackers.
Where was the help for other mortgage customers back then?
Of course, if a tracker customer hadn't been budgeting for the increase in rates, it may have come as a shock. But the average outstanding balance on a tracker is less than €150,000. And most will only have around 10 or 12 years remaining on their loan term. This means most tracker customers’ current mortgage payment, despite the recent hikes, will be lower than many other mortgage customers’ repayments.
This seems to be a classic example of the Government bowing to political pressure at the last minute when there was really no need to do so.
Although most tracker customers will gladly take the money - and you can hardly blame them.
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