First-time house buyers could save €35,000 by buying a house next year.
The incentive, introduced in Tuesday’s Budget to kick-start the property market, is only on the table until the end of 2012.
Under the deal the house buyer will get up to €5,000 a year for seven years in mortgage interest relief, but only if they buy the house next year.
The mortgage interest relief for this group will go up from 15% to 25% for first-time buyers and from 10% to 15% for non first-time buyers.
Finance Minister Michael Noonan said he wanted to get away from the “rainy-day mentality” which was depressing the property market and stifling the economy.
He also admitted he was taking a carrot and stick approach to people under 35 who were saving their money instead of buying a home.
“Even when they have a very good family income I think the psychological effect is to save rather than invest. Everybody has a rainy-day mentality and I’m trying to break that,” he added.
Other mortgage interest relief measures announced in the Budget will also help more than 210,000 homeowners who bought at the height of the boom and are now struggling with repayments.
The boom buyers will be €2,000 a year better off as the measure gives up to €167 a month extra in mortgage relief.
It applies to people who bought between 2004 and 2008 and find their properties have since slumped in value.
Mr Noonan said these people would now qualify for mortgage interest relieve at 30%.
The mortgage lender gives the houseowner the benefit of tax relief by reducing the mortgage repayment by the calculated amount.
A couple who bought in 2004 and who are currently getting €900 a year in tax relief will get €1,800 under the new deal. This is a monthly gain of €75.
For a family who bought at the height of the boom in 2006-2007, the current relief is worth up to €4,000 a year.
The new relief is in line with a Fine Gael promise to ease the burden on those who bought homes at the height of the boom, who have been dubbed the “negative equity generation”.