Mortgage Interest Relief

Oliver1985

Is there any whispers they could touch this in the budget or is it more then likely they will stick with the current 7 year plan? :eek:

D3PO

id be extremely susprised if its not at minimum reduced along with rent allowance and rent relief.

then again this government are all over the place so nothing can be ruled in or out except that the gready grey army who have got above inflationary increases to their state pension for over a decade wont be touched.

I mean its ok for those on social welfare to take a hit but god forbid the older generation put their shoulder to the wheel :rolleyes::rolleyes:

seamus

I'd be quite surprised if they touch it, since it's already being abolished for all new home loans from 2012.

If it's removed or reduced drastically, Morgan Kelly's predicted default crash will come sooner than he predicts. For those on full whack loans, TRS represents about €4,500 per year or 7% of the gross income of two individuals on the average salary.

Take that away from a lot of people, as well as increasing their income tax payments and you'll find them telling the bank where to go.

D3PO

seamus wrote: »

I'd be quite surprised if they touch it, since it's already being abolished for all new home loans from 2012.

If it's removed or reduced drastically, Morgan Kelly's predicted default crash will come sooner than he predicts. For those on full whack loans, TRS represents about €4,500 per year or 7% of the gross income of two individuals on the average salary.

Take that away from a lot of people, as well as increasing their income tax payments and you'll find them telling the bank where to go.

honestly if people are relying on TRS to keep them afloat their screwed anyway and it would only be speeding up an already enevitable process of default.

I also think your representation above is disingenous. Somebody on "full whack" loans would be earning significantly more than the average salary so why try and represent both in the same sentance they have no relevence.

Fact is most people will be in years 3 thru 7 of their TRS which reduces on a sliding scale, secondly most people would not have TRS on a full whack mortgage.

seamus

D3PO wrote: »

honestly if people are relying on TRS to keep them afloat their screwed anyway and it would only be speeding up an already enevitable process of default.

Agreed to a certain extent. But it is providing a buffer for many people until 2017, which provides some room for their situation to recover to a point that they can service the debt. Just because they would be screwed if TRS is removed now, doesn't necessarily mean they're screwed when it finishes in 2017.

I also think your representation above is disingenous. Somebody on "full whack" loans would be earning significantly more than the average salary so why try and represent both in the same sentance they have no relevence.

Not really. What I mean by "full whack" are people who took out mortgages for 35 years. A €350k mortgage over 35 years will cost around €1,200 in interest for most of the first 7 years @ 4% (generous figures).

Two people on €35k each (at the time) would have had zero difficulty securing such a mortgage.

At this stage in the game, their salaries are likely to have dropped by 10% in line with the average wage and ignoring any interest increases, they would still be paying €14,400 interest per year, on which they can claim 22.5% or €3240.

That's 5% of their gross income.

Consider the reality where people on combined salaries of €70k were being given 35 year mortgages of €400k+ and it's obvious that there are a lot of people very much dependent on TRS to keep them afloat at the moment.

Would it be better for the economy if these people all defaulted at once by removing TRS in 2011 or in dribs and drabs over the next 7 years as their ability to repay collapses? That's an actual question btw, not a rhetorical one.

Fact is most people will be in years 3 thru 7 of their TRS which reduces on a sliding scale

Anyone who bought since 2004 will get TRS up to 2017. Anyone who bought before 2004 is already in their last year of TRS.

The_Conductor

Flatrate water charges and the imposition of a property tax, are the two things being floated at the moment- haven't heard anything about TRS......

Oliver1985

Reading in the Irish Times that they may get rid of all property tax breaks bringing in 750million straight up!!
Is thos the Mortgage Interest Relief?:(

irelandspurs

Take away mortgage interst relief and there will be another empty house in laois.I certainly would lose my house at the moment without it.

gurramok

Well, it is a form of welfare aka free money for people who have mortgages and we cannot afford it anymore. Whether it gets the chop i doubt it but i'd expect a gradual reduction over the years to prepare and cushion people from the fallout.

seamus

gurramok wrote: »

Well, it is a form of welfare aka free money for people who have mortgages and we cannot afford it anymore. Whether it gets the chop i doubt it but i'd expect a gradual reduction over the years to prepare and cushion people from the fallout.

Well this is already in place. Nobody will be receiving TRS payments after 2017. Probably a little longer drawn out than it needs to be, but with the wind-down mechanism in place, I don't see the need to touch it now.

Do we have any figures for how much TRS alone costs each year?

The_Conductor

Its a combination of factors- the wind-down of TRS to be complete by 2017, alongside the abolition of mortgage interest as a deductable expense for landlords (started already, currently at 75% and the original proposal was to chop another 25% per annum off it, so it would be complete by 2014).

S.

jenny jinks

smccarrick wrote: »

Its a combination of factors- the wind-down of TRS to be complete by 2017, alongside the abolition of mortgage interest as a deductable expense for landlords (started already, currently at 75% and the original proposal was to chop another 25% per annum off it, so it would be complete by 2014).

S.

A lot of landlords will be financially ruined if that happens. Those with big loans would see their effective rate of interest doubled.

The_Conductor

jenny jinks wrote: »

A lot of landlords will be financially ruined if that happens. Those with big loans would see their effective rate of interest doubled.

Their rate of interest will remain a constant- however its entirely plausible that as much as 50-60% of their entire rental income will be demanded as tax (depending on their rental levels and what other deductions they manage to get in).......

Oliver1985

So back to my original question is this a property tax break like section 23 and all that? :eek:

The_Conductor

Oliver1985 wrote: »

So back to my original question is this a property tax break like section 23 and all that? :eek:

No- its not a property tax break- though it has the same effect. Yes, it is likely to be on the 'hit-list' next week.

gurramok

seamus wrote: »

Well this is already in place. Nobody will be receiving TRS payments after 2017. Probably a little longer drawn out than it needs to be, but with the wind-down mechanism in place, I don't see the need to touch it now.

Do we have any figures for how much TRS alone costs each year?

Its like a state secret

Ronan Lyons says Mortgage Interest Relief costs only 40m, is that correct? http://www.ronanlyons.com/2009/07/06/an-bord-snip-eile-public-sector-cuts-part-1/

The_Conductor

gurramok wrote: »

Its like a state secret

Ronan Lyons says Mortgage Interest Relief costs only 40m, is that correct? http://www.ronanlyons.com/2009/07/06/an-bord-snip-eile-public-sector-cuts-part-1/

I wouldn't be surprised if it is accurate. The elephant in the corner is Mortgage Interest Supplement- paid to social welfare recipients who are incapable of paying their inflated mortgages- its predicted to hit 1.2 billion by 2014 (of course this depends on what happens with interest rates).

gurramok

Mortgage Interest Supplement is only 63m now. http://www.finance.gov.ie/documents/public%20expenditure/2010/REV2010.pdf (page 185)

Oliver1985

So whats the 750million they can save straight up include sure no one is building at the moment?

The_Conductor

gurramok wrote: »

Mortgage Interest Supplement is only 63m now. http://www.finance.gov.ie/documents/public%20expenditure/2010/REV2010.pdf (page 185)

Thats the headline figure. The issue is the % of residential mortgages that are forecast to be distressed over the next 3 years, in light of continued unemployment, alongside increasing ECB rates. The current proposal is to create a new NAMA wing for managing these, removing the cap on loans- and transferring residential mortgages over to this new NAMA section. Its come up in the IMF discussions.

3DataModem

jenny jinks wrote: »

A lot of landlords will be financially ruined if that happens. Those with big loans would see their effective rate of interest doubled.

This would kick me right in the pants... however interest rates are low. Any landlord who is paying large interest rates at the moment (4-4.5) is a madman. Also there are plenty on interest-only purely to maximise tax relief (i.e. paying off their homeloan fast, whereas paying the min on investment properties).

Cue mega tax evasion by landlords. Doing cashback deals with carpet companies to recarpet their flats every year, get the tax relief on the cost of recarpeting, then get some cashback from the carpet dealer close to the amount of the tax paid, etc etc.

At least it will make renovations and improvements very cost-effective for landlords as every receipt is deductible.

(now where's my big box of receipts for 2010?)

Oliver1985

I think they didnt touch this the irish times are reporting no change, property tax of 100-200 euro a year

The_Conductor

Oliver1985 wrote: »

I think they didnt touch this the irish times are reporting no change, property tax of 100-200 euro a year

Its still not decided- keep in mind the property tax they are proposing was supposed to be a local authority tax to fund local councils, not for the central kitty. The 100-200 a year, simply doesn't add up (particularly given the number of exemptions to the scheme- not to mention anyone who has bought a non-qualifying property in the past 15 years and got slaughtered in stamp duty will surely challenge it.......) I bought my townhouse in 2000- 10 years ago, its currently in negative equity despite 10 years of mortgage payments, and I've never managed to fully pay off the 22k in stamp duty I paid at the time.......?

The big difference between this bust and the 1980s- was in the 1980s the country was bankrupt- and no-one had two brass buttons between us, however we also had very little if any private debt. Now the country is broke- however people privately are up to the arses in debt. There is only so much blood you can get from a stone- and by god- there is precious little blood left in most of the tax paying populace.

We're not going to manage to tax our way out of this one.......

Oliver1985

Home now readin over it, found the bit in it

Interest relief on residential mortgages was abolished in Budget 2010 with a gradual phasing out of mortgage interest relief (MIR) up to end of 2017. Loans taken out on or after 1 January 2013 will not qualify for MIR and the relief will be abolished completely for the tax year 2018 and subsequent tax years. The full year saving will be €485 million. Any acceleration of the withdrawal of interest relief would place unacceptable financial pressures on households with the highest risks of being in negative equity. Any move in this direction would increase the risk of default. There will be no change to current arrangements.