Bring back Mortgage Interest Supplement

[Brendan Burgess]

An excerpt from my pre-Budget submission on behalf of the Irish Taxpayer

Bring back Mortgage Interest Supplement

We have the bizarre situation that if someone is in difficulty with their mortgage, they get no help from the government. But if they sell their home to a private landlord or fund, they will get Housing Assistance Payment to pay the rent to the landlord so that he can pay his mortgage.

If someone is genuinely struggling with their mortgage and their home is suited for their needs, pay the mortgage interest for them. It makes much more sense to pay 3% a year interest on a mortgage on a house worth €150,000 than paying €12,000 a year rent on their behalf to a private landlord. And if someone retains ownership of their home, they are much more motivated to get back on their feet.

Reintroducing Mortgage Interest Supplement would allow you to scrap the Mortgage to Rent Scheme which is just a scam on the taxpayer.

 

[odyssey06]

A very good proposal.

 

[Firefly]

Brendan,

I would assume anyone not able to repay their mortgage would not be able to do so even if the interest element was paid for them. Also, it would be open to abuse.

Firefly.

 

[Brendan Burgess]

Hi Firefly

We have an assumption that mortgages must be repaid. While it's a good thing to do, there should be no obligation on people who can't do so to repay their mortgage.

If they are paying the interest at market rates (as distinct from tracker rates.) it's sustainable for the borrower and the lender.

So if I have a mortgage from AIB of €200k on a €200k house and I can pay absolutely nothing. The state could pay the €7k a year interest for me.

Everyone wins.

• I keep my house
• AIB has a loan at market rate
  
• The state pays €7k a year for my housing needs instead of the €12k it would cost them otherwise.

Sorry, the mortgage to let financiers would lose out.

Brendan

 

[Firefly]

Hi Firefly

We have an assumption that mortgages must be repaid. While it's a good thing to do, there should be no obligation on people who can't do so to repay their mortgage.

If they are paying the interest at market rates (as distinct from tracker rates.) it's sustainable for the borrower and the lender.

So if I have a mortgage from AIB of €200k on a €200k house and I can pay absolutely nothing. The state could pay the €7k a year interest for me.

Everyone wins.

• I keep my house
• AIB has a loan at market rate
  
• The state pays €7k a year for my housing needs instead of the €12k it would cost them otherwise.

Sorry, the mortgage to let financiers would lose out.

Brendan

So in that scenario the mortgage would more or less convert to an interest only mortgage?

I think it could still be open to abuse though. I could stop paying my mortgage tomorrow, the tax payer could pay my interest, then in about 20 years time when my house will be worth a lot more I could sell it, pay off the principle and pocket the profit tax free...

 

[TheBigShort]

So if I have a mortgage from AIB of €200k on a €200k house and I can pay absolutely nothing. The state could pay the €7k a year interest for me.

Everyone wins.

• I keep my house
• AIB has a loan at market rate
  
• The state pays €7k a year for my housing needs instead of the €12k it would cost them otherwise.

Sorry, the mortgage to let financiers would lose out.

On the face of it, an excellent idea.
Just a few questions;
Who or how and when is the principle paid back?
How would that affect the banks ability to loan further if the principle is tied up in this type of scenario?
And in the case of widespread mortgage arrears, this will put downward pressure on house prices. How would your proposal operate then?
But, in essence, I think you have at least identified a plausible concept for dealing with mortgage arrears.

 

[MrEarl]

Hello,

Subject to proper "policing" so as to ensure the system is not abused, I think this is a very good idea.

I am tempted to suggest that an absolute end date should be included in the submission as I would not like to see these arrangements run for ever - but I'm thinking 5-7 years.

 

[Brendan Burgess]

Who or how and when is the principle paid back?
How would that affect the banks ability to loan further if the principle is tied up in this type of scenario?

The principal does not need to be paid back. Banks just lend it on to someone else.

 

[Brendan Burgess]

I think it could still be open to abuse though. I could stop paying my mortgage tomorrow, the tax payer could pay my interest, then in about 20 years time when my house will be worth a lot more I could sell it, pay off the principle and pocket the profit tax free...

To qualify for MIS, the borrower would have to qualify for social housing. It wouldn't be just a question of your stopping paying your mortgage and the taxpayer picking up the tab.

I would have no problem with any amount paid by the government becoming a charge on the property. So if the property is sold for more than the outstanding mortgage, any interest paid by the government should be repaid first.

Brendan

 

[Brendan Burgess]

I attach a submission I made to the government in February of this year.
Brendan