Reliefs for negative equity ‘good news’

RELIEFS for the tens of thousands of home owners now sunk in negative equity have been welcomed as “a surprise, but really, really good news.”

Extending Mortgage Interest Relief (MIR) in the budget up to 2017 for those who had bought at the property market’s peak was “fabulous news for the hard-pressed home buyer”, said Frank Conway of the Irish Mortgage Corporation, noting that between 150,000 and 200,000 people may now be in negative equity.

The extension of MIR would be a welcome fillip to them, he asserted, noting it can be worth between €50 and €100 a month. “It will lessen the impact for those who bought at the peak of the market,” agreed Diarmuid Kelly of 900-member strong mortgage broker body PIBA.

First-time buyers qualify for a top rate of €417 relief per month, in the first two years of taking out their mortgage. Builders’ group, the CIF, calculates the overall relief to qualified home buyers to be worth up to €10,000 over seven years.

MIR has been steadily scaled back in recent years. However, in last April’s supplementary budget, and now in Budget 2010, Mr Lenihan has made extra concessions for those who bought homes in the past few years, especially at market peak around 2006.

Mr Lenihan said he was extending the period of entitlement to MIR until 2017, when it would then be abolished. Some categories of this relief were due to expire at the end of 2010.

For those seeking to buy in the next few years, Mr Lenihan said that qualifying loans taken out before July 1, 2011 will continue to get relief at current levels for seven years, with transitional arrangements for the subsequent 18 months at a reduced level and duration.

Mr Lenihan said he has asked the Financial Regulator to examine extending the banking sector’s Code of Conduct on mortgage arrears from six to 12 months moratorium before instituting legal proceedings.

That extension, however, has been criticised by Free Legal Aid Centres director Noeline Blackwell as “derisory.”

Threshold said while seeking to extend the moratorium from six to 12 months on mortgage arrears offered some relief, “it would be more realistic and helpful if an actual fund was put in place – which could be operated by each local authority – to genuinely assist people out of mortgage repayment difficulties,” noted chairperson Aideen Hayden.

Easing the mortgage burden for those in negative equity via MIR extension and arrears moratorium was welcomed by mortgage brokers and by property estate agency bodies like the IAVI and IPAV – but the latter objected to the idea of a new property tax without stamp duty reform.

Estate agents Knight Frank noted that while extending MRI helped recent and impending buyers, “we are unhappy that he has introduced a note of uncertainty in announcing plans for a future property tax without any indication as to how this might be applied”.

This introduces a level of uncertainty in the market, which is certainly unhelpful. This may act as a further brake to purchasing decisions until the actual details of this tax becomes transparent.

IAVI president Áine Myler said introducing a property site tax was likely to take years to prepare and it was “imperative that there are transitional arrangements made for those who have already paid penal levels of stamp duty”.

International agents CBRE agreed that an annual tax on all privately-owned residences was inevitable but commended Government for not rushing the measure.