Relief for first-time buyers to be axed

GENEROUS mortgage interest relief for first-time buyers is set to be abolished sooner than expected under the Programme for Government.

However, those who bought during the boom are in line to receive up to €500 per month in relief come June.

Mortgage interest relief is a special scheme in which homeowners receive some of the interest they pay on their mortgages.

Currently a first-time buyer has to the end of the year to complete the purchase of a new home and begin paying their mortgage in order to qualify for the relief, which is available for up to seven years after buying.

However, under the new Programme for Government, mortgage interest relief is set to be abolished for new buyers beginning this June.

The deal is managed through Tax Relief at Source (TRS). First-time buyers are the biggest beneficiaries of the scheme, where up to €416.67 is repaid directly back to mortgage holders’ bank accounts each month.

The maximum qualifying interest amount for a first-time couple is €20,000. In year one and two of purchasing, the maximum interest relief is 25%, or €5,000 annually. This reduces to €4,500 in years three, four and five and to €4,000 in years six and seven.

Director of, Frank Conway, said: “Over a seven year period, a qualifying first- time buyer couple could receive a maximum relief of €31,500.

“The generous relief was originally due to be phased out at the end of 2011 but this looks set to be brought forward to June of this year and it is not clear if the effective date for the change is the start of the end of the month.”

Mr Conway said first-time buyers need to be aware of the change as this will affect the real cost of their mortgage for the next seven years.

“It means that a first-time buyer, who purchases a home up to June 2011, will be in line to qualify for up to a massive €31,500 over a seven year period. However, a first-time buyer who completes their home purchase after June 2011 will receive €0.”

The Programme for Government plans to also increase mortgage interest relief up to a maximum of €500 per month for first-time buyers who purchased between 2004 and 2008.

“This is a welcome move and will help those who are most exposed,” said Mr Conway.

A number of mortgage lenders continue to offer loans of up to 92% for first-time buyers. However, qualifying for a mortgage continues to be a challenge with extremely cautious lenders using due-diligence when assessing the credit worthiness of applicants, according to Mr Conway.

First-time buyers now make up the majority of new mortgages in Ireland with four in ten mortgages in the fourth quarter of 2010 being for first-time buyers.

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