Tax ‘state-subsidised’ tracker mortgages, urges former Lenihan adviser

Tracker mortgages should be taxed, according to a leading economist and one-time adviser to the Government.

The controversial proposal by Alan Ahearne of the National University of Galway will anger the thousands of homeowners on trackers and prove politically explosive for the Government.

Mr Ahern said the tax was justified because the section of society not on trackers was effectively subsidising those who are.

There are 375,000 tracker mortgage customers in the country.

Permanent TSB has a total mortgage book of €32.9bn — €22.5bn of which relates to trackers.

Bank of Ireland has a mortgage book of €28bn, €17.2bn involving tracker mortgages; while €17.6bn of AIB’s €41bn mortgage book are trackers.

They are a massive drag on profitability. Bank of Ireland is 15% state-owned while the other two banks are 99.8% state-owned.

Mr Ahearne said it is costing the banks huge amounts in capital to fund tracker mortgages and this capital is coming from the taxpayer, which means it is in effect a state subsidy.

“I know it would be extremely politically difficult, but it is a pure public finance issue,” said Mr Ahearne, a special adviser to the late minister for finance, Brian Lenihan.

Tracker mortgages are mostly lossmaking as the interest charged is less than the banks’ cost of funding.

And because the banks are mostly controlled by the State, the taxpayer is stumping up the capital to subsidise tracker mortgages, he said.

At the conference, the ESRI’s John FitzGerald said he was opposed to the idea as changing the terms of a contract after it is signed — effectively what the policy would involve — violates contract law.

It would also tarnish the country’s reputation in the financial world, he said.

The Government had been in talks with the troika about putting trackers into a special purpose vehicle, to be funded by the ECB. However, the ECB rejected the proposal.

The other option is to get funding through the European Stability Mechanism. However, tracker mortgages are considered legacy assets and there is widespread opposition among eurozone creditor countries to such a deal.

Yesterday the deputy president of the German Bundesbank, Sabine Lautenschlager, said: “As these [legacy] risks were created in the past, under the responsibility of individual member states, they should be borne in a national context too.”

More on this topic

Lloyds to buy Tesco Bank mortgages for around €4bnLloyds to buy Tesco Bank mortgages for around €4bn

Thousands will lose their homes, warns campaigner David Hall as Ulster Bank announces mortgages saleThousands will lose their homes, warns campaigner David Hall as Ulster Bank announces mortgages sale

Central Bank data shows slight fall in mortgage arrearsCentral Bank data shows slight fall in mortgage arrears

No Consent, No Sale bill 'should be no-brainer'No Consent, No Sale bill 'should be no-brainer'


Against popular wisdom and flying a plane made from bamboo, wire and bike handlebars, a Co Antrim woman blazed a sky trail for aviation and for the independence of women, writes Bette BrowneMagnificent Lilian Bland blazed a trail for independence of women in her plane of bamboo

The epic battle for the bridge at Arnhem, as depicted in the blockbuster 'A Bridge Too Far', saw the Allies aim to end the war by Christmas 1944, but failed as a huge airborne assault force failed to take the last bridge across the Rhine. In an extract from his latest book 'A Bloody Week', Dan Harvey tells the story of one of the hundreds of brave men from Ireland who gave their all to the Allied campaignThe bridge to war: Dan Harvey's new book looks at the Irish who went a bridge too far

More From The Irish Examiner