First-time home buyers may receive aid under new scheme

A scheme to help first-time home buyers with tax relief and state top-ups of mortgage deposit savings is being examined by the Government.

The Help to Buy scheme is under consideration as part of efforts to tackle the housing crisis, but will not be included in Minister for Housing Simon Coveney’s action plan for housing, to be announced tomorrow.

While Mr Coveney will reiterate the programme for government’s plan to introduce such a scheme, details are being withheld until October’s budget.

Mr Coveney had pushed for it to be included in his action plan but Minister for Finance Michael Noonan said tax measures can only be announced on budget day.

Mr Noonan last night emphasised that the Government does not want to cause any market disruption.

He said when former tánaiste Michael McDowell proposed abolishing stamp duty in 2006, it contributed to a slump in house sales.

Mr Noonan said he is prepared to backdate Help to Buy measures to this month.

Mr Coveney is understood to have pushed for a top-up scheme in recent weeks. A similar scheme operates in the UK, where mortgage deposit savings are topped up by 25 per cent, to a limit of £3,000.

Similar approach

Fianna Fáil

proposed a similar approach in its election manifesto, although it said the top-up would be restricted to €5,000 per person, or €10,000 per couple.

It is understood that Mr Noonan and others raised concerns with Mr Coveney that such a scheme could drive up demand and house prices at a time when few homes are being built.

Of concern to all Ministers is the difficulty in saving for a mortgage deposit in Dublin and other urban areas due to the Central Bank lending rules.

One Government source suggested the value of Help to Buy would have to be around €10,000 to have a tangible effect.

The emerging scheme is a mixture of a deposit top-up and tax relief, modelled on the Home Renovation Incentive Scheme.

VAT relief targeted at first-time buyers also featured in discussions.

The programme for government contains a proposal to temporarily reduce VAT on new affordable homes and apartments from 13.5 per cent to 9 per cent.