Change search
ReferencesLink to record
Permanent link

Direct link
Banking advice on fixed or adjustable mortgage rates
KTH, School of Architecture and the Built Environment (ABE), Centres, Centre for Banking and Finance, Cefin.
2012 (English)In: Journal of Financial Services Marketing, ISSN 1363-0539, Vol. 17, no 3, 227-241 p.Article in journal (Refereed) Published
Abstract [en]

Since the mid-1990s, Sweden has experienced a period of rapidly rising property prices, and household indebtedness has kept an even pace. The choice between fixed and adjustable interest rates has become increasingly important. This article analyses mortgage rate advice issued by a bank adviser in monthly newsletters during the period 2001-2009, focusing on the content and searching for patterns that may be related to earlier findings. The banking advice is classified into two dimensions: the content and the strength of advice. We find that a large part of the advice suggests that borrowers divide their loans and choose both adjustable and fixed interest rates. Contrary to existing literature, there is no apparent association between the advice provided and interest rate trends (neither short-nor long-term trends). Nor do we find a significant association between the advice and the interest rate gap between fixed and variable rates. This finding implies that the advice in these newsletters was formulated on a rather unclear basis and was of limited use for borrowers.

Place, publisher, year, edition, pages
2012. Vol. 17, no 3, 227-241 p.
Keyword [en]
advice, ARM, bank, FRM, household fi nance, mortgage choice
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-105258DOI: 10.1057/fsm.2012.16ScopusID: 2-s2.0-84866641687OAI: diva2:570606

QC 20121120

Available from: 2012-11-20 Created: 2012-11-19 Last updated: 2013-09-24Bibliographically approved
In thesis
1. Essays on mortgage rate choice in Sweden
Open this publication in new window or tab >>Essays on mortgage rate choice in Sweden
2013 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Buying a home is for many households the financially most important purchase they will make. The choice of mortgage instrument is also of importance in that it will determine a household’s financial exposure. In the aftermath of the 2007–2008 financial crisis in the United States, the potential consequences for borrowers and the financial system became apparent in many countries. Even though the choice of mortgage is described as a very complex transaction, international studies have found that borrowers are less than optimally knowledgeable about the possible future consequences of their choice. This lack of knowledge has raised concern and prompted calls for more research on differences between mortgage markets and factors affecting consumers’ mortgage choice.

This thesis answers this call by empirically exploring the Swedish case and by offering an expanded knowledge about factors that influence borrowers’ mortgage choice. The thesis consists of five papers, and, in most cases, interviews and questionnaires were used to collect the data, depending on which type of data collection was considered best suited to serve the purpose of the individual paper. A close reading approach was also applied in one of the papers.

The findings indicate that in a Swedish setting, there are factors affecting borrowers’ mortgage choice that have not previously been fully explored in the literature: the media and bank advisors. During the period studied, a negative correlation existed between the media and the choice of fixed rate mortgages, whereas a positive correlation existed between bank advisors and the choice of fixed rate mortgages. The study on advice given by a bank advisor also shows the advocacy of a mix of fixed and adjustable mortgage rates. Further findings corroborate those of earlier international studies, such as the impact of income, education, financial literacy and loan-to-value ratios on mortgage choice.

A general conclusion that can be drawn from the findings in the Swedish context is that the most financially vulnerable borrowers—those with lower income, lower education and/or higher loan-to-value ratios—are more likely to choose higher levels of fixed rate mortgages (or lower levels of adjustable rate mortgages). In doing so, they avoid exposing themselves to liquidity problems, which can be caused by increasing mortgage rates, and make future mortgage expenditures more predictable. These findings contradict much of the concern that both scholars and financial authorities have expressed about households’ choice of mortgage instrument. Hence, these findings are of importance not only to research on mortgage choice but also to policymakers and the financial industry.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2013. 38 p.
, Trita-FOB-PHD, 2013:2
Mortgage choice, Swedish mortgage market, consumer characteristics, borrower perceptions, financial advice, housing co-operatives
National Category
Economics and Business
urn:nbn:se:kth:diva-129030 (URN)978-91-85783-33-5 (ISBN)
Public defence
2013-10-14, F 3, Lindstedtsvägen 26, KTH, Stockholm, 13:00 (English)

QC 20130924

Available from: 2013-09-24 Created: 2013-09-17 Last updated: 2013-09-24Bibliographically approved

Open Access in DiVA

No full text

Other links

Publisher's full textScopus

Search in DiVA

By author/editor
Hullgren, Maria
By organisation
Centre for Banking and Finance, Cefin
In the same journal
Journal of Financial Services Marketing
Economics and Business

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Altmetric score

Total: 49 hits
ReferencesLink to record
Permanent link

Direct link