Purpose – Highlights co-ops mortgage choice strategy and factors that influence the board’s master mortgage decisions in Swedish co-op associations.
Data/methodology – Data is collected through a pre-study interviewing chair persons in co-ops in Stockholm followed up by a more extensive questionnaire. Answers from these are tested by logistic regression and compared to hypotheses based on earlier international findings on mortgage choice on a household level and additional findings from the interviews.
Findings – The mortgage choice in co-ops seems to be more dependent on financial similarities than physical location. LTV ratios have a dominant influence in that co-ops with high LTV ratios have a lower preference for ARMs. When checking for location, the media and individual chair persons also seem to affect the choice. Overall, there seems to be awareness in co-ops boards about the potential financial effects of their mortgage choice.
Implications –The negative connection between high LTV ratios and ARMs implies that boards try to make their mortgage expenditure more predictable. This reduces liquidity risks which may be of importance for financially constrained owners. Findings indicate that co-ops are risk averse and that the short term threat for increasing interest costs is low. This is of value to both homebuyers and the financial industry.
Originality – This paper contributes to the mortgage choice literature by examining factors influencing mortgage choices in an organizational context such as co-op associations, to my knowledge not done before.