“The mortgage interest deduction is one of the pillars of our national housing policy,” said Michael D. Berman, chairman of the Mortgage Bankers Association. “Limiting its use will have negative repercussions for consumers and home values up and down the housing chain.”
But tax policy experts say that for all its popularity, the value of the deduction in public policy is debatable. It was intended to encourage homeownership, but housing economists point out that countries like Canada and Australia, which do not allow mortgage interest deductions, have homeownership rates similar to those of the United States.
“What the subsidy is doing is driving up prices by encouraging well-off people to take out bigger loans, to buy bigger houses,” said Roberton Williams, a fellow at the Tax Policy Center. “So I think there’s a question about whether that is something the government should be doing with tax money.”
This article in the NY Times points out that, while many "middle class" tax payers believe that the Mortgage Interest Tax Deduction helps them, the reality is that it helps the wealthy even more because they buy bigger more expensive homes. And, this also motivates the market to "Bubble-ize". And, THIS benefits the big banks disproportionately as well. Time to re-think pros and cons of home ownership.