Bid to extend pause in withdrawal of local mortgage interest relief

Deputy Aidan Matthews has put forward an amendment to next week’s budget to extend a pause on the withdrawal of mortgage interest relief for a further year, following similar pauses in 2023 and 2024.

The States has been trying to phase out the tax relief that islanders can claim on the borrowing on their homes since 2013.

The latest Budget proposes restarting that phase-out for principal private residences.

Deputy Matthews said a pause would provide support to islanders during a period when they could be subject to an additional 2p in the pound on income tax.

This move would impact around 6,000 individuals, reducing tax revenues by £1m.

However, SPF Private Clients managing director Pierre Blampied said he was unsure if the change would be particularly significant for the Guernsey mortgage market.

‘It would be a positive, but I’m unsure of how much of a positive step it would be,’ he said.

‘I don’t think it would make a massive difference. We are not seeing a significant number of people struggle at the moment.’

He added that more significant factor would be a further fall in interest rates which he expected to continue their current downward trend.

Bank of England interest rates were cut from to 5% in August after spending many months at 5.25% – their highest level for 16 years. ‘I would expect another fall prior to Christmas,’ he said.

‘I think it will be a better year for the property market next year on the back of further interest rate falls.’

Mr Blampied said the year had not been great for new mortgages.

‘We have seen a notable pick up in the last seven weeks, but not enough to make this a below-average year. We are particularly seeing this in the open market with more enquiries about people moving to Guernsey.’

Under the current budget plans residential let properties will continue to benefit from mortgage interest relief, under plans to support the rental market. Mr Blampied said this was where support was most needed.

‘The biggest problem, is the rental market and a massive lack of stock,’ he said.

‘Landlords are selling up as low fixed rate buy-to-let mortgages come to and end. They are leaving the rental market as they find higher rates unprofitable.’