Mortgage rate choice: the effect of bank advice
(English)Article in journal (Other academic) Submitted
Because of drastically increased home prices and debt ratios during the last decade, households in Sweden have become financially more vulnerable to changes in mortgage rates. This article attempts to explore empirically the driving forces behind mortgage choice among home owners in Sweden. Data were collected through interviews and a questionnaire directed to homebuyers in the Stockholm area. The results show three major factors influencing mortgage choice: Bank advisors and - in line with earlier findings - income and loan-to-value ratio. The importance of bank advisors for mortgage choice is a finding that, to the author’s knowledge not been established before. There is evidence that borrowers who perceive themselves as being influenced by their bank are less likely to have adjustable rate mortgages (ARMs) thus avoiding exposure to sudden peaks in mortgage expenditure. This article provides insights for those responsible for giving advice concerning mortgages and to policy makers in connection to the ongoing discussions within the EU about rules intended to protect borrowers from irresponsible lending and to ensure that mortgages go only to those who can afford them.
Economics and Business
IdentifiersURN: urn:nbn:se:kth:diva-129017OAI: oai:DiVA.org:kth-129017DiVA: diva2:649196
QS 20132013-09-172013-09-172013-09-24Bibliographically approved