>From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally

If it makes you feel any better, the home owner in reality gets practically none of the money. Since everybody gets the deduction it just causes everyone to have to bid that much more in order to be the highest offer. And the higher prices don't really spur new home construction to compensate as you might expect, because the areas with high demand are largely urban areas with minimal available undeveloped land and zoning regulations that often prohibit the construction of higher density housing that would relieve pricing pressure. The result is that the big winners are banks, which end up making larger loans and collecting that much more government-subsidized interest.

I didn't even take this into account when purchasing my home ... I made sure to buy within my means regardless of possible tax deductions I get to maybe make in the future...

Whether you did or didn't individually, the price of housing overall reflects the fact that people generally do. It's outside of your hands.

Oh, so really it only goes into bankers' pockets?

I feel much better now.

Thank you for your answer. On one hand, corporations get tax breaks on debt interest, even in Canada, so why should not people? On the other hand I believe that corporations are way more rational than people in taking on debt. For most people buying a house is not an investment, but very emotional decision, and I see how tax incentive may put more steam into bubbles.

In Canada you get an exemption for capital gains on your principal residence, which is a pretty big tax break already.

But personal bankruptcy still carries somewhat of a social stigma whereas corporate bankruptcy is part of a good business plan.