Matthew Weinzierl, a Harvard Business School professor, said doing away with the deduction could put downward pressure on housing prices in Massachusetts. But if the action is part of a broader financial reform, he added, falling values could be offset by improved consumer confidence.
“Eliminating the mortgage interest deduction is not a policy choice in a vacuum,’’ Weinzierl said. “Some spending has to be cut and some taxes have to rise for our fiscal situation to be healthy. The [deduction] is a good place to start.”
Paul Willen, economist for the Federal Reserve Bank of Boston, said some borrowers would find themselves with less money at the end of the year, but overall the deduction is not a big economic driver.
“This is a real huge subsidy to rich people,” he said. “If we are tightening our belts, then you say maybe this is the expenditure we just can’t afford anymore.”