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The relationship between consumer characteristics and mortgage preferences: A case study from Sweden
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0002-4877-938
KTH, School of Architecture and the Built Environment (ABE), Centres, Centre for Banking and Finance, Cefin.ORCID iD: 0000-0003-4394-4020
2012 (English)In: International Journal of Housing Markets and Analysis, ISSN 1753-8270, Vol. 6, no 2, 209-230 p.Article in journal (Refereed) Published
Abstract [en]


– The purpose of this paper is to investigate consumer characteristics that influence Swedish consumers’ mortgage rate decisions, such as the choice between an adjustable rate mortgage (ARM) and a fixed rate mortgage (FRM).


– Data were collected in a randomised survey of the Swedish population in 2010. Through binary logistic regression, the effects of education, income and risk aversion on household mortgage decisions are investigated. In addition, consumers’ financial literacy and self-reported ability to handle sudden mortgage rate increases are examined. A test of gender effects is also performed.


– The results show that a lower level of education, lower income, lower financial literacy, and trouble handling interest rate increases influence Swedish consumers to choose ARMs. Gender does not significantly affect the overall results. However, a gender-divided regression shows that age, a low level of education and risk averseness significantly affect men’s mortgage choices, whereas income, trouble handling interest rate increases and low financial literacy significantly affect women’s mortgage choices.

Practical implications

– The most vulnerable Swedish consumers choose FRMs to a greater extent and, thereby, make future expenditures more predictable for the single household by reducing liquidity risks.


– This paper tests a number of characteristics in predicting consumers’ mortgage choices, emphasises the importance of loan takers’ ability to cope with sudden mortgage rate increases, highlights the importance of financial literacy in understanding consumers’ financial choices and elucidates the Swedish case.

Place, publisher, year, edition, pages
2012. Vol. 6, no 2, 209-230 p.
Keyword [en]
Mortgage, FRM, ARM, Personal finance, Sweden, Household
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-129018DOI: 10.1108/IJHMA-01-2012-0004ScopusID: 2-s2.0-84878217512OAI: diva2:649242

QC 20130924

Available from: 2013-09-17 Created: 2013-09-17 Last updated: 2013-11-25Bibliographically 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

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