As expected, the recent budget is going to cost most of us money!
We are being hit a number of ways,
· Income levies
· increased vat,
· increased motor tax and petrol costs
· increased registration fees for universities,
· Reduced tax relief on medical and dental expenses.
· And the usual suspects alcohol and Tobacco
This will reduce demand in the economy and this in turn will impair growth.
To view a number of worked examples on the impact of today's budget please follow the following link to some information provided by The Department of Finance.
To calculate the effect on your income of today's budget please follow the following link to a KPMG budget calculator.
The most significant changes in so far as they impact on middle income house owners and potential householders are the changes in mortgage interest relief and the introduction of an income levy of 1%.The levy is very easy to calculate in that it is1% of your earnings up to 100k per earner..( 2% if you earn over 100k) .For a couple earning €75k this levy will cost €750.
The mortgage interest relief has been increased for anybody who bought a house after 01/01/2005. The new rates will be effective from 01/01/2009.
Prior to today, tax relief was available at 20% of the interest paid for the first seven years of the mortgage. The new rates are:
·25% year 1 and 2.
·22.5% year 3 to 5
·20% year 6 and 7
For example ,in the first two years of a €200k mortgage, the new relief would save you €500 per annum and for a €300k mortgage the relief would save you approx €800 per annum. Chances are that the income levy will swallow up any savings!
Comment on housing
As far as we can see there is nothing significant in the budget that will work to shore up house prices. This is good news for first time buyer's
.So the question buyers are asking is whether now a good time to buy is or will house prices fall further. We believe that the market will look after this issue .
We believe that developers will now move to sell houses as prices that first time buyers are willing to pay. This will mean that many developers will reduce their prices.
We recommend that would be buyers keep a close eye on prices and be ready to move if suitable opportunities arise.
Developers simply cannot afford to wait around with interest bills clocking up by the hour.
The banks have an important role to play in this mix by ensuring that affordable mortgages are available to suitable applicants.
We need the Banks to be well capitalized and ready for business and competing for your business ..