Guide to Budget 2018 for First Time Buyers & Homeowners

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What Budget 2018 Means For You

It’s that time of the year again. On the 10th of October, Minister for Finance Paschal Donohoe had the nation hanging on his words as he announced the financial factors that will shape our everyday lives over the next year and beyond. As always, the Minister had a lot to cover, so we spoke to AIB Economist Dara Turnbull to answer some of the most important questions from Budget 2018. 

What does Budget 2018 mean for First Time Buyers? 

Overall, the government are providing a total of €1.83bn to help with pressures in the housing market. Here’s how it breaks down:

 

·         A €500m increase in funds for Rebuilding Ireland – the housing action plan announced last year – taking it to €6bn

 

·         An additional 3,000 homes to be built by 2021 – upping the amount of homes provided by Rebuilding Ireland to 50,000 in total

 

·         The creation of Home Building Finance Ireland – a new €750m fund to provide funding at favourable terms for builders

 

·         An increase in the Housing Assistance Payment of €149m - taking it to €301m in total

 

·         An increase in the “Vacant Site Levy” to 7% from January 2019

 

“The Government is aiming to increase housing supply to reduce the demand for residential properties that we have right now in Ireland,” Dara says. “In theory, this should see an easing in house price inflation and make it easier for First Time Buyers to get their foot on the property ladder.”

What about the Help-to-Buy Scheme? 

Anyone who’s thinking of buying their first home will be happy to hear that the Help-To-Buy scheme, which provides up to €20,000 for First Time Buyers when purchasing a newly built home, will remain in place.

How will the Budget affect existing homeowners?

“Most of the measures in the Budget were aimed at helping people who are currently shut out of the residential property market to get onto the property ladder,” Dara explains. “However, households which took out a mortgage between 2004 and 2012, and have been availing of Mortgage Interest Relief (MIR), will welcome the news that the scheme is being extended out to 2020. The relief will continue at 75% of the existing rate in 2018, 50% in 2019 and 25% in 2019.”

Did the government announce any plans to alleviate rent pressure? 

There were no specific plans announced in Budget 2018 to control private rents but some of the other housing measures could help to stabilise the market.  “A stronger pace of construction growth should, in theory, help to ease the upward pressure on rents, as supply increases,” Dara says.

What tax changes were announced in Budget 2018?

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There were no great surprises in the tax announcements in this budget, with a further reduction in the Universal Social Charge (USC) probably the most well-received announcement. Here are the main tax takeaways from Budget 2018:

 

·         The 2.5% USC rate will be reduced to 2%, while the 5% rate will be reduced to 4.75%

 

·         The earning ceiling for the 2.5% USC rate is to be increased to €19,372

 

·         A €750 increase in the income tax standard rate band for all workers

 

·         Earned income credit for self-employed people to be increased by €200 to €1,150

 

·         A decrease in Deposit Interest Retention Tax (DIRT) from 39% to 37% with further reductions in 2019 and 2020

 

However, despite hopes that the government would continue to revisit the tax-free thresholds for inheritance and gift tax, there will be no changes made to them in 2018.

How will these tax changes affect the average earner?

“The changes to personal taxation mean that a single worker with no dependents, earning an average salary of €37,000 per annum would have a net take-home pay in 2018 of €29,885 compared to €29,640. This works out at €246 extra per year, or around €4.70 per week,” Dara explains. “In general, the benefits to most people’s personal finances from Budget 2018 are modest, though with the economy still growing strongly and unemployment falling at a steady pace, not adding significant extra ‘heat’ to the economy right now seems to be a prudent measure.”

Will Budget 2018 mean the average family is better off? 

“The Budget aimed to tackle some of the biggest challenges facing families, including access to affordable housing,” Dara notes. “It also provided for modest reductions in personal taxation. The Government had a difficult balancing act to pull off, with a need for increased public investment on the one hand versus not wanting to overheat a strongly growing economy on the other. Its hands were also tied by European fiscal rules. With that in mind, there was always going to be limited scope to improve the finances of average families via budgetary measures.”  

Our Mortgage Interest Rates Are Coming Down 

As of 1st November 2017, we're reducing our Standard Variable Rate by 0.25% to 3.15%. This means that a customer with a €200,000 mortgage will make an annual saving of €315 over 25 years. Visit our Mortgage Interest Rates page to find out more about our current rates and reductions. 

 

Allied Irish Banks, p.l.c. is an authorised agent and servicer of AIB Mortgage Bank in relation to the origination and servicing of mortgage loans and mortgages. Allied Irish Banks, p.l.c. and AIB Mortgage Bank are regulated by the Central Bank of Ireland. Copyright Allied Irish Banks, p.l.c. 1995.

 

Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland. Copyright Allied Irish Banks, p.l.c. 1995.

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