Consumer Corner: What’s the story with the mortgage interest relief scheme?

The Government said it was introducing the measure to help people affected by interest rate hikes and they say that around 208,000 households can claim the money. 

The Government said too that this is a once-off for this year so the advice is to act fast.

So who can actually get this money back? For anyone on a fixed rate then the bad news is that you cannot apply. 

The relief is only available to tracker mortgage holders and those on variable rates and to be eligible you must have an outstanding mortgage balance of between €80,000 and €500,000 at the end of 2022. 

Basically, the initiative is in place to anyone who has seen their mortgage interest bill for 2023 go up on 2022. 

It is worth pointing out too however that anyone who was on a fixed rate and re-fixed at a higher rate in 2023 can also apply.

According to Daragh Cassidy of Bonkers.ie you don’t have to be in financial distress to apply for the relief or even show that you’re struggling with your mortgage payments. You just have to show that your payment has gone up.

“You can only apply for the relief on your main home, it doesn't apply to any rental properties, holiday homes or second homes you may have,” he says.

The Government says that the average amount that people will get back is around €800 and the relief is calculated on the increase in the interest paid on a mortgage between the end of 2022 and 2023, up to a maximum of €1,250.

“As the European Central Bank (ECB) started hiking rates in July of 2022, it does technically mean that you can’t claim interest on the full increase in rates that you've experienced,” says Mr Cassidy.

As an example for someone who had mortgage repayments of €15,000 in total in 2022 but at the end of 2023, these repayments for the full year came to €18,600 in total, which is an increase of €3,600. 

You can then claim tax relief at 20% on the €3,600 difference, meaning you'll get €720.

In order to claim you will need to head to Revenue’s website and file a tax return through Revenue’s online service. 

You will be asked to upload your mortgage statements for 2022 and 2023. 

Once you have done this you will receive a credit which will be offset against your tax liability for 2023.

“And presuming you don't owe Revenue money, the funds will then be paid into your account within a few days. To claim the relief you must also be compliant with Local Property Tax requirements,” Mr Cassidy points out.

Marian Ryan, consumer tax manager with Taxback.com said that the relief will only be available to taxpayers and so those who fall outside the income tax net, such as the many retired individuals on modest tax-exempt incomes, won’t benefit even if they are still repaying their mortgage and have seen a substantial increase in their mortgage interest bill.

“Unlike the previous mortgage interest relief scheme, which was granted at source by the various lenders, in order to claim the new relief, taxpayers must file a tax return with Revenue and be compliant with Local Property Tax requirements.

“There would certainly be merit in changing the way this relief is to be granted so that banks would grant it at source. They have already done so when the previous scheme was in place.”

Ms Ryan said that like every tax relief, credit and expense, it’s easy to apply when you know how.

“Taxpayers can apply for their mortgage interest tax credit directly with Revenue through their online account. However, as we move further into 2024, it will be interesting to see the official figures on the number of homeowners that avail of this credit. Generally speaking, due to either a lack of awareness of a reluctance to contact the taxman, thousands of taxpayers across the country miss out on their tax entitlements every year.”

“There will be some people, particularly PAYE workers who have never had a reason to file a return before, who will be daunted at the prospect of filing a tax return and who will lose out on the mortgage interest relief they are entitled to as a result.”

Ian Lawlor of Lotus Investment Group says that recent data from the Central Bank indicates that a significant number of residential mortgage customers are currently facing or will soon encounter challenges in meeting their mortgage payments. 

He says that while the temporary relief measures are a step in the right direction, the eligibility criteria coupled with the temporary nature of the relief, may leave a substantial number of homeowners without much-needed support.