IMF Frowns on Mortgage Tax Deduction; Recommends Return to Basics

``There have been six major banking crises in developing countries since the mid-1970s, all were associated with housing booms followed by busts according to an International Monetary Fund (IMF) Global Financial Stability Report to be issued next week... where recessions are linked to housing booms and busts, those recessions are on average more severe and last longer than those that are not... The relationship between rising house prices and mortgage credit growth, particularly in advanced economies, was amplified by government participation in housing finance. Subsidies to first-time home buyers, tax deductibility of capital gains on housing, and government provision of mortgage guarantees or credit tend to amplify house price swings by exacerbating both the boom and the subsequent bust. ''