Government leaves stamp duty rates unchanged

Budget 2007:Brian Cowen has left stamp duty rates unchanged but increased mortgage interest relief for first-time buyers from €8,000 to €16,000.

Stamp duty remained unchanged in the Budget but mortgage interest relief increased.

Despite much speculation that this year's Budget may see a reform of the property tax, the Minister for Finance said any stamp duty cut would - more likely than not - be incorporated into the sale price and end up in the pocket of the seller.

"Our firm aim is to help first-time buyers directly and substantially, not only those who are in the market now but also those who are already paying their first mortgage.

"The best way to do this is by way mortgage interest relief," he claimed.

The Minister said he was doubling the ceiling on mortgage interest relief for first-time buyers from €4,000 single and €8,000 married or widowed per year to €8,000 and €16,000 respectively.

The increased support will be available to all those currently in receipt of first-time buyers relief who are in the first seven years of their mortgage.

But first-time buyers will remain subject to a stamp duty rate of 3 per cent on the purchase of a house worth €317,501 or more.

In his Budget speech to the Dáil, Mr Cowen said about 125,000 first-time buyers would benefit as a result of today's measures.

He said the changes would cost the Exchequer €60 million annually.

The measures mean a couple with a joint mortgage of €379,000 over 33 years at an interest rate of 4.25 per cent will be able to claim interest relief on the full amount of their loan.

The couple will gain up to €1,600 extra annually or €133 per month in mortgage interest relief.

The Minister the measures would help existing first-time buyers in their first home as well as potential first-time buyers without acting "to inflate house prices further".

He said he was also raising the ceiling on interest relief for non first-time buyers €2,540 single and €5,080 married to €3,000 and €6,000 respectively.

Exchequer figures for the 11 months up to November this year show the Government took in over €1 billion more than expected from stamp duty.

Fine Gael environment spokesman Fergus O'Dowd said today's announcement on mortgage interest relief, while welcome, will be wiped out by the ECB's likely decision tomorrow to increase interest rates said .

Mr O'Dowd said that there is absolutely nothing in today's Budget to address the "affordability gap" that is leaving thousands without a home and that not one single extra affordable house will be built as a result of what was announced today by Minister Cowen.

Estate agents Sherry FitzGerald expressed disappointment with what it described as the Government's inaction on much needed amendments in the rate of stamp duty applicable to first time buyers.

Chief economist at Sherry Fitzgerald Marian Finnegan said: "The penalising rate of stamp duty applicable to first time buyers in the second-hand market is acting as a barrier to entry for this cohort of the population into the established property market."

Ms Finnegan said:"The decision to increase the threshold for stamp duty from €190,501 to €317,000 in Budget 2005 went some way to addressing this situation but it is not far enough.

"The divergent treatment of first time buyers in the new homes and second-hand market has for too long created an unnatural bias against investing in the second-hand market. This bias needs to be addressed with urgency," she added.