Contrary to expectations, several critical budget announcements did not create much hue and cry, despite their far-reaching implications. One move that strikingly encapsulated the administration’s targeted fiscal strategy was granting financial benefits to certain demographics, possibly as an electoral bait.
Last year, previous finance minister Michael McGrath defied the potent cautions of the Central Bank and his administrative team and proceeded with the reinstatement of mortgage interest relief. A distinct tax reduction scheme for certain borrowers, it was predicted to be unfair, costly, and challenging to execute by government officials. The central bank expressed concerns about its potential to further bloat the property market and benefit a particular group of older borrowers who had already gained from low-interest rates.
Ignoring these warnings, McGrath insisted on implementing the measure, justifying it as an extraordinary and temporary solution. The move went on to be frequently cited throughout budget discussions and subsequent parliamentary debates as the “temporary, one-year mortgage interest relief scheme” or TOYMIRS. Yet, alarmingly, this temporary measure was reintroduced in the 2025 budget.
The common expectation was for this relief to conclude after a year, with no serious pleas for an extension. However, regardless of the declining interest rates and the initial beneficiaries (tracker mortgage holders) of this relief, the budget was contrarily designed to appeal to specific voter groups.
On budget day, Minister Jack Chambers announced a further extension of the relief for another year citing the continued effects of high interest rates on households. Despite Sinn Féin’s earlier proposition for an enlarged relief program, there was no dissent. The decision pleased 130,000 to 140,000 tracker holders, though most hadn’t claimed the relief. Political parties can now promise their continuing support in campaign talks. The scheme resulted in a squander of additional €40 million. This isn’t just spare change, especially considering that an invaluable tax relief provision for renters costs a mere €25 million more.
The expense of mortgage interest alleviation is significantly lower than last year’s anticipated amount of €125 million. The underwhelming uptake of the programme is to blame, presumably. Fewer than 25,000 individuals had claimed on their 2023 returns, according to statistics quoted in the Dáil. However, the figure has slightly increased since the information was presented earlier this year. Those who are eligible for the scheme could save up to €1,250. This year’s guidelines are focused on the payment difference in 2024 compared to 2022 for mortgages ranging from €80,000 to €500,000. Tracker holders, along with a few others from different lending groups, are expected to be the primary beneficiaries.
However, the question arises as to whether tracker holders are truly deserving of this benefit. Frankly, the answer is negative due to several reasons. Firstly, they enjoyed lower repayments during the super-low interest rate era, with many individuals paying less than one percent. With increasing interest rates, the average tracker rate didn’t significantly exceed that of other mortgage holders and is currently on a downturn.
There’s also an issue of fairness. If you’re a younger home purchaser who had higher interest rates in past years and haven’t seen an increase in your repayments, it’s fair to feel disgruntled. Given that you can’t claim the relief and your monthly payment likely exceeds the average tracker holder, these individuals have a valid reason to be frustrated. As interest rates decline, tracker rates are becoming similar to those of newer borrowers.
It’s also worth noting that some individuals, whose loans were sold by primary banks to funds and were initially assured that they were not at a disadvantage, are yet paying mortgage rates that climb up to 9 percent. These funds purchased loans at reduced rates and are now making substantial profits. Due to their credit histories, many borrowers cannot change their loans, despite regulation attempting to facilitate the process. It’s unlikely that these individuals would receive any sort of mortgage interest reduction.
The decision to prolong mortgage interest relief, alongside other ‘one-time’ fixes such as energy credits, double child benefits and so forth, is mistaken and may turn Budget 2026 into a massive challenge for the incumbent finance minister. According to the post budget research by the Economic and Social Research Institute, these short-term solutions have been instrumental in maintaining household incomes. Yet, discontinuing these benefits would adversely affect people’s financial status. Therefore, it is clear that there needs to be a shift back to traditional, enduring financial policies to ensure security and long-term certainty for less affluent individuals, especially when these one-time aids become unaffordable.
The existing Coalition also faces a barrage of criticism and counterpoints, mainly focusing on its fiscal choices as the election approaches. Budget ministers Jack Chambers and Paschal Donohoe have been quoted stating they simply cannot afford to reinstate the 9 per cent VAT rate for the hospitality industry because it would diminish the budget income tax package’s finances. However, this claim is undermined when you consider that approximately half of the €2.2 billion spent on one-time policies are universal payments.
While it is correct that one-time policies may not recur and the yearly cost of the VAT reduction would be more than €750 million, this intricate detail may be overlooked in an election season filled with accusations of fiscal negligence and a perceived lack of support for various industries. The outrage of small businesses was evident on Katie Hannon’s recent RTÉ show, Upfront. The hospitality industry’s upcoming ‘day of action’ will likely reinforce this sentiment, and they are unlikely to be the only industry lobbying for a fairer share of financial resources.
Given these events, there’s a clear risk that the budget could devolve into a reckless bidding war. As the current influx of tax revenue permits awkward financial compromises, a dangerous blend of prudence and extravagance could dominate the election campaign.