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Leon Farrell/Photocall Ireland
Budget 2012

Budget 2012: Help for first-time buyers - but it 'won't solve real problems'

Michael Noonan also confirmed the introduction of the widely expected €100 household charge.

BUDGET MEASURES TO increase mortgage interest relief may help first-time buyers – but they risk causing further problems in our banking system, one economist has warned.

Finance Minister Michael Noonan announced this afternoon that buyers who entered the property market between 2004 and 2008 will see interest relief on their mortgage payments boosted to 30 per cent, from its current rate of between 20 and 22.5 per cent.

Meanwhile, those buying houses for the first time next year will receive 25 per cent interest relief on their payments. But Noonan warned that all mortgage interest relief will be phased out by 2018.

Economist Ronan Lyons, a property market analyst for, said although the move would help some households, it would not solve wider problems in the property market.

“All of this does is make borrowing incredibly cheap. They force the banks to offer incredibly low interest rates, then they offer relief on those rates,” he told “But the root problem is not the cost of credit, it’s the lack of credit. I don’t think it’s a clever move.”

He said the Government risked making banks unsustainable if it continued to make restrictions on interest rates and mortgage payments – with taxpayers potentially on the hook to fund the lenders.

Household charge

Michael Noonan also confirmed the widely expected introduction of a blanket €100 household charge. Lyons said that this new levy was “obviously unfair” – but added that it would make voters more receptive to the idea of a graduated property tax if that measure was to be brought in next year.

In the commercial property market, Michael Noonan said the Government had been unable to develop a scheme to tackle the controversial practice of upward only rent reviews. He said any such measure would “be vulnerable to legal challenge or require compensation to be paid to landlords”.

However, he said that tenants of Nama-owned properties would be able to bypass their lease arrangements and apply for rent reductions directly from Nama, “where it can be shown that rents are in excess of the current market levels”.

This move has been welcomed by the Small Firms Association, whose chairman Ian Martin said: “As NAMA is now such a major property owner, this will make a real difference.

“However, further pressure must be put on those landlords in the private sector, who have so far refused to negotiate, and are putting businesses and jobs at risk.”

Full coverage of all the developments in Budget 2012>

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