Mortgage interest deduction can be scrapped without disrupting the market: study

The mortgage interest deduction can be abolished without causing major market disruptions, researchers from Delft University of Technology concluded. In their study, published in the economic journal EBS, they argue that monthly payments will remain affordable without the deduction.

The election manifestos of multiple parties, including D66, GroenLinks-PvdA, Volt, CDA, and ChristenUnie, include proposals to gradually phase out the mortgage interest deduction. Opponents warn that eliminating this tax credit for homeowners will erode property values and increase housing costs.

But according to the researchers, this fear is unfounded. A gradual reduction of the mortgage interest deduction will not hinder property values, they conclude. Prices will continue to rise slightly in the coming years, albeit more moderately than if the tax deduction were not phased out.

The concern that households who recently purchased a home will no longer be able to afford their future housing expenses is also unfounded, according to the researchers. “The difference in purchase quotes appears to be modest after 15 years of tax deregulation.”