Mortgage interest rate relief could be ‘doubled’

FINANCE Minister Charlie McCreevy should double mortgage interest relief in the Budget, according to economist Jim Power.

The Friends First chief economist said the minister could be forced to introduce the measure after axing the 3,810 first time buyers’ grant in Thursday’s estimates.

“Such has been the reaction over the last 24 hours to killing the first time buyers’ grant that I believe the minister may make a move on interest rate relief in the Budget.

“If I were a betting man I would say there is a 50:50 chance Mr McCreevy will double mortgage interest relief for anything up to five years for first time house buyers in the Budget,” he said.

Mr Power said personally he was opposed to the decades old scheme.

“Builders simply factored it in, including it in the price of a house,” he said.

Killing the first time buyers’ grant will save the exchequer close to 38m a year in grant payments but will also unravel the complex and costly bureaucratic processing of grants which will free up Department of Environment staff for other work.

Mr Power said one of the negative aspects of the Celtic Tiger was property inflation which is making it extremely difficult for people to get on the property ladder.

Doubling interest rate relief could cost in the region of 100m a year according to Mr Power.

Fine Gael’s Gay Mitchell, complained yesterday that many first time buyers who have paid a deposit to purchase a house, but who have not entered a contract, will now lose their first time buyers’ grant.

Labour Party spokesperson on the environment Eamon Gilmore, accused the Government of favouring investors over first-time buyers following the abolition of the first-time buyers’ grant.

“The big winners are investors in the housing market. For several years investors have been outbidding first-time buyers for residential property.

“This was one of the major problems in the housing market which the Bacon reports attempted to address.

“The first-time buyers’ grant gave practical help to young couples trying to compete with better-funded investors for the purchase of a house ,” he said.

“Mr McCreevy however, can always be relied upon to favour the rich. This time he has chosen property investors over first-time buyers.

“The abolition will also make it more difficult to obtain information about what proportion of house purchases are first-time buyers as against investors.

“ Up to now this information could be gleaned by reference to the number of first-time buyer grants paid-out by the Department of the Environment and local government.

“Now that the grant is abolished there will be no reliable means of establishing the proportion of house sales going to first-time buyers.

“The minister must reverse this decision. It discriminates against the young and leaves them with no other option but to struggle on in an inadequately regulated rented sector,” said the Dublin TD.