MIR and impact on House Prices

Villa05

http://www.independent.ie/national-news/noonan-told-to-extend-tax-relief-on-mortgages-3276751.html

Finance Minister Michael Noonan is facing mounting calls within the Coalition to extend the mortgage interest relief deadline for homebuyers beyond the end of the year following a significant surge in the property market in recent weeks.

Sindo wrote "Currently, mortgage interest relief runs for seven years."

From http://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_interest_relief.html
Mortgage interest relief will be abolished entirely after 31 December 2017.

Thats not 7 years

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A saving figure of 27,500 is very misleading
I have done a quick calculation on this website, It is going to be slightly out because the calculator has 7 year benefit, while there is only 5 years and 2 months left in the benefit. I have used figures from year 3 to year 7 inclusive to account for this http://www.mortgages.ie/index.cfm/spKey/first_time_buyers.tax_relief_calculator.html

Loan amount €150,000
% Rate - 4.5%
2 people buying
Total Saving = €6,530.40

equivalent to a 4.5% drop in the property price
Note: calculation based on 5 years of the benefit (only 5 years and 2 months left). Year 3 to Year 7 on the calculator.
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Values across the country as a whole were up 0.9 per cent in September, following increases in August and July, according to the official Central Statistics Office (CSO) figures.

This is correct, however, Take Dublin out of the picture and how are the figures looking. Or look closer and just take South Co. Dublin out and how are we doing.

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What if the mortgage interest relief has flushed out all those who qualify for a mortgage. How will that impact prices going forward?

kodoherty93

Well the ECB unlike the Federal reserve in the us and bank of England in the uk. Hasn't said we well keep rates at 0.5% until 2014.

I think if the ECB starts to up rate to reduce inflation mortgages will get more expensive meaning people will want to get a cheaper mortgage now than in 2/3 years when it's far more expensive.

The property tax in the budget I can't see affecting demand but uncertainty on income taxes could

Villa05

kodoherty93 wrote: »

I think if the ECB starts to up rate to reduce inflation mortgages will get more expensive meaning people will want to get a cheaper mortgage now than in 2/3 years when it's far more expensive.

The property tax in the budget I can't see affecting demand but uncertainty on income taxes could

This is the con trick that is perpetrated on the people by Gov, Banks and Media who are dependent on high property prices.

All mortgages in this country bare the same characteristics of sub prime mortgages in the USA i.e the interest rate is not fixed for the duration of the mortgage. Given that the ECB Rate is below 1%, the only way the rate can go is upwards.

Add in the Mortgage Interest Relief which reduces over time and will be abolished on 31/12/2017. This means peoples repayments will be further increased over time, not the best scenario in an environment where higher taxes are required and where there is downward pressure on wages.

What this means is that both the Government and the Banks cleerlead by the media are colluding in trapping First time buyers in current low rates, knowing full well that these rates will increase significantly over time.

Shameful!!!!!!!!

StillWaters

Villa05 wrote: »

What this means is that both the Government and the Banks cleerlead by the media are colluding in trapping First time buyers in current low rates, knowing full well that these rates will increase significantly over time.

Shameful!!!!!!!!

I think buyers are smart enough to know rates will rise over time!! Very patronising.

Victor

kodoherty93 wrote: »

The property tax in the budget I can't see affecting demand but uncertainty on income taxes could

It won't affect demand, but it will affect prices.

What we are likely seeing at the moment is a surge in purchases to avail of TRS (MIR was restructured long ago).

Villa05

StillWaters wrote: »

I think buyers are smart enough to know rates will rise over time!! Very patronising.

Read the 2nd post on this thread again

StillWaters

Villa05 wrote: »

Read the 2nd post on this thread again

Touche

The_Conductor

Villa05 wrote: »

What if the mortgage interest relief has flushed out all those who qualify for a mortgage. How will that impact prices going forward?

Similar to the First Time Buyers grant- there would be a one-off reciprochal reduction (not of the same magnitude) in price, reflecting people's lower capacity to pay. Its a one off though- property tax, water rates etc- are all ongoing and dynamic charges that can (and will) change from one year to the next.

At the end of the day- property will, subject to supply and demand, sell for what people are willing and capable of paying for it. Abolition of MIR- reduces the capacity of most first time buyers to pay- hence- it stands to reason, whichever market segment FTBs are most active in, will bear the brunt of the abolition of MIR. Apartments/townhouses, can expect to get hit on this- ye semidetached/detached in D4/D6 not so.

Villa05

smccarrick wrote: »

Abolition of MIR- reduces the capacity of most first time buyers to pay- hence- it stands to reason, whichever market segment FTBs are most active in, will bear the brunt of the abolition of MIR. Apartments/townhouses, can expect to get hit on this- ye semidetached/detached in D4/D6 not so.

I'm not so convinced on this. Apartments and to a lesser extent townhouses would only be of interest to investors and will not sell unless they provide a + 10% gross return

The ladder is well and truly gone. Those that are qualifying for mortgages are at the top end of income levels and job security and I would suspect they are buying their "house for life". This may not be D4/6 levels but it would include good semi-d and some detached in other decent areas.

This may go some way in explaining the CSO figures showing some stabilisation. What is selling is at the higher end of the housing market, therefore, one would expect a slight uptick in prices.

the groutch

this is a non-story, there is no pressure from within the coalition, just certain people with vested interests trying to talk-up the market, using the Spindo as their mouthpiece.