Looking at the make up of the mortgage market

Delighted to see the Central Bank getting some granular detail on our market! … Literally, we have been waiting for years to go beyond the overview figures.

We see now that 25% of Mortgages are buy-to-let’s (representing €24.6bn in lending), so almost 200,000 loans are secured for the purpose of investment, which raises an interesting taxation point when it comes to retirement.

Recent figures by the pensions board show that 40,000 fewer people are in pensions and that of the 2.1m workforce that about 800,000 have pensions; naturally this doesn’t factor in many property investors who use that as a retirement plan.

And that is where I think we’ll see some traction, people may move to paying down their debts (which they view as a retirement plan via a RIP loan) rather than putting funds into pensions. Perhaps with the changes in interest rates for many residential investment loans they are doing neither and merely trying to stay afloat.

The recent pension levy of 0.6% of the fund value is doing to life assurance retirements what the changes in taxation treatment from the 2009 Finance Act did in mortgages. Effectively removing a portion of unrealised profit. If you have mortgage interest of €1,000 and rent of €1,000 you are deemed to be making a €250 profit. Equally, if you take 0.6% off the top of a pension pot, you are levying something the person has not received.

This type of approach is contrary to common sense, and the trend seems to be to take money that is invested (either in property or pensions) and use a portion of it for revenue raising, that is very concerning when it comes to retirement provision.

One Comment

  1. John Carolan

    About time the Central bank gave us some decent information, good blog Karl.

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