Finance Minister Michael Noonan has announced a tax refund for first time buyers who save to buy their first home.

Speaking during his Budget speech in the Dail, Mr Noonan said he is introducing a refund for DIRT tax on any savings used by young couples who are looking to buy their first home.The refund will apply from tonight and will run until the end of 2017.

It will apply to savings “up to a maximum of 20pc of the purchase price of the home,” Mr Noonan said. “As a result, first time buyers will be able to save for their first home and retain 100pc of the interest that they earn on their savings. I would expect that the banks will introduce specific savings products to support this new initiative,” he said.

Mr Noonan announced a number of measures in his speech which are aimed at increasing activity in the construction sector to address what he called the insufficient supply of homes. Mr Noonan said he is extending the Home Renovation Incentive to rental properties “whose owners are liable to income tax.”

He said that he wanted to see the benefits of the incentive reflected in lower rent levels.He said this incentive will remain in place until the end of 2015.