Sunday Times: Relief cuts cost the cautious

FIRST-TIME house buyers risk losing up to €26,100 in mortgage interest tax relief if they put off purchasing until next year.

Property experts believe the relief is worth more than any reduction in house prices over the next 12 months. Couples buying this year can claim tax relief on interest up to €20,000, shaving €31,500 from the cost of their mortgages over seven years. If they wait until next year the interest that qualifies for tax relief will be capped at €6,000 and available for only six years, giving a maximum tax break of €5,400.

Those who delay until 2013 will get no relief. The phasing out of mortgage interest tax relief was agreed with the European commission and the International Monetary Fund as part of the four-year austerity plan. It is unlikely to be reversed if a new government takes power after the general election. The €20,000 limit in 2011 makes tax relief available on all of the interest paid on mortgages of up to €500,000 assuming an interest rate of 4.5% and a 35-year term.

Karl Deeter, of Irish Mortgage Brokers, said: “Couples would have to earn an extra €50,000 before tax to make up for the interest relief they’d lose by not buying in 2011. They’re better off buying now, even though houses prices are likely to be lower in 2012.”

It has emerged Permanent TSB is offering rock-bottom mortgage deals for new business despite causing anger last week by raising rates for existing customers looking to fix. New customers pay 3.1% for two years, if they borrow less than 50% of the value of their homes, but existing customers must pay 7.25% to fix for the same term.

Its five year fix is 3.7% for new business but 8.75% for existing customers. New customers can fix for 10 years at 4.5% but existing customers pay 9.1%.Guard against rising rates

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