The Incidence of the Mortgage Interest Deduction: Evidence from the Market for Home Purchase Loans

Authors

Andrew Hanson, Marquette UniversityFollow

Document Type

Article

Language

eng

Format of Original

21 p.

Publication Date

11-2011

Publisher

SAGE Publications

Source Publication

Public Finance Review

Source ISSN

1091-1420

Abstract

This article examines the incidence of the largest housing-related subsidy in the federal budget, the home mortgage interest deduction (MID). The author uses the difference in interest rates for loans made around the MID limit to identify the incidence of the subsidy. Using data on individual mortgages originated in 2004, the author estimates that for every $1,000 borrowed without the MID, the interest rate on the entire loan decreases by between 3.3 and 4.4 percent. Results suggest that lenders capture between 9 and 17 percent of the subsidy created by the home MID through higher mortgage interest rates.

Comments

Accepted version. Public Finance Review, Vol. 40, No. 3 (May, 2012): 339-359. DOI. © 2012 Elsevier. Used with permission.

Recommended Citation

Hanson, Andrew, "The Incidence of the Mortgage Interest Deduction: Evidence from the Market for Home Purchase Loans" (2011). Economics Faculty Research and Publications. 136.
https://epublications.marquette.edu/econ_fac/136