Mortgage delinquency during COVID-19: do financial literacy and personality traits matter?

Abstract

Purpose

Mortgage delinquency has become a major crisis following the COVID-19 pandemic. This study explored mortgage delinquency antecedents, focusing on two individual-level factors: financial literacy and personality traits.

Design/methodology/approach

Using a large sample of 2,511 consumers, we examined the direct effect of financial literacy and its interaction with personality traits to predict mortgage delinquency based on logistic regression analysis. We further provide several robustness tests to validate our findings.

Findings

We find that financially literate consumers are 6% less likely to delay their mortgage repayment during the COVID-19 pandemic. Moreover, personality traits such as neuroticism and extroversion positively and conscientiousness negatively moderate the given linkage between financial literacy and mortgage delinquency.

Practical implications

Banks and financial companies may devise relevant policies to reduce mortgage repayment by knowing the interplay between financial literacy and personality traits. Personality traits can be considered one of the parameters while sanctioning mortgages to prospective customers.

Originality/value

Our research examines the linkage between financial literacy, personality traits and mortgage delinquency based on a large nationally representative sample. Our findings suggest that personality traits moderate the effect of financial literacy on mortgage delinquency.

Citation

Chhatwani, M. (2022), "Mortgage delinquency during COVID-19: do financial literacy and personality traits matter?", International Journal of Bank Marketing, Vol. 40 No. 3, pp. 484-510. https://doi.org/10.1108/IJBM-05-2021-0215