Search results

1 – 10 of over 5000
Article
Publication date: 4 July 2016

Maria Hullgren and Inga-Lill Söderberg

The purpose of this paper is to investigate driving forces behind mortgage rate choice among homeowners in a market of no mortgage rate spread. The study reported on was conducted…

Abstract

Purpose

The purpose of this paper is to investigate driving forces behind mortgage rate choice among homeowners in a market of no mortgage rate spread. The study reported on was conducted in Sweden, a country relatively spared both from effects of the subprime crisis and the on-going Euro-crisis. A number of potentially influential factors, such as respondents’ risk aversion, financial vulnerability, experience, expectations as well as the impact of media and bank advisors are examined and a number of demographic factors controlled for.

Design/methodology/approach

The study reported on is based on data from a national randomized survey conducted in Sweden in 2012. An empirical analysis is carried out on a sample of 474 households with mortgages. A logistic regression is performed to test a model based on hypothesized factors.

Findings

The study shows that consumers choosing fixed rate mortgages (FRMs) have high LTV and high risk aversion and perceive their choice as having been influenced by bank advisors. This is in line with earlier findings. Lower levels of – or no – FRMs (more adjustable rate mortgages) seems to be attractive for the wealthier with higher education and previous experience of home owning. Other factor negatively affecting the choice of FRMs are: being younger; being influenced by media; and perceiving oneself as financially vulnerable.

Research limitations/implications

To summarize, this paper contributes to research in two major ways: first, the Swedish case is modeled against a review of international research on mortgage rate choice. Second, a number of consumer-related factors are investigated, and their relative contribution as drivers of a choice of FRMs are tested. This gives input to more theoretical research conceptualizing a model for the understanding of how consumer mortgage rate choices are made.

Practical implications

The results should serve as an alarm bell for the industry, as the consumers described – the youngest mortgage holders, the financially vulnerable with low repayment capacity and those easily influenced by reports in media – are a potential threat to stable development of long term customer relations and mortgage portfolios.

Social implications

The results gives reason for policy makers to address the question and reasons to call for more studies of the preferences and choices of the younger consumers.

Originality/value

This study represents an investigation into some factors not often studied in relation to mortgage rate choice. It also highlights the Swedish case and puts it in an international context.

Details

International Journal of Bank Marketing, vol. 34 no. 5
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 17 August 2017

Maria Hullgren

This paper aims to highlight co-ops mortgage choice strategy and factors that influence the board’s master mortgage decisions in Swedish co-op associations.

Abstract

Purpose

This paper aims to highlight co-ops mortgage choice strategy and factors that influence the board’s master mortgage decisions in Swedish co-op associations.

Design/methodology/approach

Data are 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 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. Loan-to-value (LTV) ratios have a dominant influence in that co-ops with high LTV ratios have a lower preference for adjustable-rate mortgages (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.

Practical 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/value

This paper examines factors influencing mortgage choices in an organizational context such as co-op associations. The master mortgage in a co-op can have major influence on members financial situation but, to the author’s knowledge, a similar study has never been done before, neither in an international nor a Swedish context.

Details

International Journal of Housing Markets and Analysis, vol. 10 no. 4
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 31 May 2013

Maria Hullgren and Inga‐Lill Söderberg

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…

Abstract

Purpose

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).

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

International Journal of Housing Markets and Analysis, vol. 6 no. 2
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 1 September 1997

David Leece

Examines recent innovations in the UK mortgage market and links these to the theoretical and empirical literature on the choice of mortgage instrument by households. Low inflation…

1395

Abstract

Examines recent innovations in the UK mortgage market and links these to the theoretical and empirical literature on the choice of mortgage instrument by households. Low inflation rates and employment insecurity have led to a demand for more flexible payment and amortization scheduling. Estimates a multivariate logit and a probit model to highlight the underlying determinants of amortization rates (mortgage maturity) from 1987 to 1991. Sees affordability criteria and the susceptibility of a household to financial problems as important determinants of extended mortgage maturities while the absence of these problems encourages shorter maturities, consistent with lifecycle behaviour. These choices provide the underpinnings to subsequent mortgage market innovations.

Details

Journal of Property Finance, vol. 8 no. 3
Type: Research Article
ISSN: 0958-868X

Keywords

Article
Publication date: 28 August 2009

Hanudin Amin, Mohamad Rizal Abdul Hamid, Suddin Lada and Ricardo Baba

The purpose of this paper is to explore the reasons behind customers' selection of Islamic mortgage in Sabah, Malaysia and present factor and cluster analyses to identify the…

3218

Abstract

Purpose

The purpose of this paper is to explore the reasons behind customers' selection of Islamic mortgage in Sabah, Malaysia and present factor and cluster analyses to identify the importance of choice criteria for Islamic mortgage selection. The choice criteria among Sabahans are investigated along with their gender, age group, religion, monthly income, and ethnicity.

Design/methodology/approach

A total of 250 bank customers responded to a survey addressing the choice criteria for Islamic mortgage providers. It is important to address the criteria in order to make sure the service providers are able to come up with attractive package of Islamic home financing to their prospective customers. Of these, only 211 questionnaires are usable, which gives us a response rate of 84.4 percent. No extra efforts are conducted in order to increase the number of respondents. Non‐probability, convenience sampling is implemented. This paper uses a quantitative study similar to what employed by Lymperopoulos et al. and by Devlin. Frequencies, descriptive, factor and cluster analyses are used to analyze the data.

Findings

A cluster analysis indicates that bank customers can be divided into three clusters. Members of cluster 1 reported a tendency to select mortgage bank on the basis of “service provisions” while the members of cluster 2 reported a tendency to select mortgage bank on the basis of “elements of Shariah and Islamic principles.” While those of members in the cluster 3, almost entirely had lower mean scores as compared to other clusters. Nevertheless, the members of this cluster reported a greatest tendency to choose Islamic mortgage provider on the basis of “pricing.”

Research limitations/implications

The paper has addressed three limitations that provide opportunities for other researchers to explore them in depth in the future in the similar field of Islamic home financing. The limitations are presented in the conclusion's part.

Practical implications

With regard to implications, this paper offers inputs for management decision among Islamic mortgage providers (i.e. Islamic banking institutions such as full‐fledged Islamic banks, conventional banks with Islamic windows and conventional banks with Islamic subsidiaries). In addition, this paper adds to the literature in the area of home loans/financing.

Originality/value

This paper offers the choice criteria for Islamic mortgage providers provides useful information on the Islamic mortgage providers' selection among Sabahans. This paper indeed provides useful information on the main choice criteria that affect why Sabahan choose Islamic mortgage providers.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 2 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 3 May 2013

Paola Zocchi

In Italy three quarters of the stock of households' mortgage debt is exposed to interest rate risk. The aim of this paper is to explain why the majority of mortgage holders in the…

Abstract

Purpose

In Italy three quarters of the stock of households' mortgage debt is exposed to interest rate risk. The aim of this paper is to explain why the majority of mortgage holders in the Italian residential mortgage market have chosen a mortgage with a variable interest rate.

Design/methodology/approach

The empirical analysis has been carried out on a sample of 959 Italian households on the basis of data from the Survey on Household Income and Wealth by the Bank of Italy and covers the period between 1997 and 2006.

Findings

The outcomes raise some doubts about the efficiency of the Italian mortgage market in terms of risk allocation between banks and householders. Fixed rate mortgage (FRM) versus adjustable rate mortgage (ARM) choice appears to be guided by a short‐term outlook informed by the need to maximize a household's immediate utility. Furthermore, households seem to embrace a myopic perspective, since the preference for ARMs increases with the lengthening of the maturity of the mortgage and with any increase in the size of the principal amount. Also, lending policies appear to have a considerable influence on a household's FRM‐ARM choice.

Practical implications

It seems that the Italian mortgage market requires adequate initiatives to improve households' financial literacy. Some measures to mitigate the assumption of the interest rate risk by households would be also welcomed.

Originality/value

This study represents the first investigation into the relationship between lending policies of banks and householders' mortgage choice from the perspective of a country distinguished by a high and persistent preference for the adjustable rate mortgages.

Details

Journal of European Real Estate Research, vol. 6 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 2 May 2017

Evgeniy M. Ozhegov

This paper aims to examine the heterogeneity of preferences of mortgage borrowers of Russian state-owned suppliers of residential housing mortgages.

Abstract

Purpose

This paper aims to examine the heterogeneity of preferences of mortgage borrowers of Russian state-owned suppliers of residential housing mortgages.

Design/methodology/approach

Analysis takes into account the underwriting process and the choice of contract terms of all loans originated from 2008 to 2012. The data set contains demographic and financial characteristics for all applications, loan terms and the performance information for all issued loans by one regional bank which operates government mortgage programs. The paper uses a multistep semiparametric approach to estimate the determinants of bank and borrower choice controlling for possible heterogeneity of preferences, sample selection and endogeneity of contract terms.

Findings

The study found that the demand of low-income households who are unable to afford to improve the housing conditions by other instruments than government mortgage is less elastic according to the change both in interest rate and maturity compared with higher-income households.

Social implications

Given lower elasticities of the demand, the low-income group of borrowers has higher potential cost of loan and is usually rejected by commercial banks. The presence of the Agency of Housing Mortgage Lending special programs with subsidized interest rate for special constrained categories (young families, teachers, researchers etc.) widens the access for housing conditions’ improvements as a part of housing affordability government program.

Originality/value

The main contribution to the literature is modeling choice of contract terms as interdependent by the structural system of simultaneous equations with heterogeneous marginal effects.

Details

Journal of European Real Estate Research, vol. 10 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 1 November 1998

James A. Talaga and Joshua Buch

With the development of increasingly complex mortgage instruments, the process by which consumers choose among these instruments also increases in importance. The real estate…

1075

Abstract

With the development of increasingly complex mortgage instruments, the process by which consumers choose among these instruments also increases in importance. The real estate literature does not address how consumers of mortgage instruments make tradeoffs among the different instruments. The study controlled for interest rates, and looked at five variables: number of points, additional fees, reputation of lender, type of mortgage (FRM vs. ARM), and term in years of mortgage. Using conjoint analysis it is found that consumers do indeed have different preferences for different mixes of mortgage instruments. It is suggested that mortgage instruments can be tailored to different market segments of borrowers.

Details

International Journal of Bank Marketing, vol. 16 no. 6
Type: Research Article
ISSN: 0265-2323

Keywords

Article
Publication date: 29 August 2008

Hanudin Amin

The purpose of this paper is to investigate the choice criteria for Islamic home financing in Malaysian Islamic banks. Most importantly, this study considers establishing a…

6218

Abstract

Purpose

The purpose of this paper is to investigate the choice criteria for Islamic home financing in Malaysian Islamic banks. Most importantly, this study considers establishing a specific rank of choice criteria for Islamic home financing. Moreover, these choice criteria will also be ranked according to the selected demographic elements such as gender, marital status and age range.

Design/methodology/approach

This study uses a quantitative study similar to what was employed by previous researchers. The study presents primary data collected by self‐administered questionnaires involving a sample of 150 Malaysian bank customers in Labuan, Malaysia. Of these, 141 questionnaires were returned with a response rate equivalent to 94 per cent. The Islamic home financing choice criteria as perceived by the Malaysian bank customers are analysed using frequencies, independent samples t‐test and ANOVA.

Findings

The results suggest that “Shariah principle”, “lower monthly payment”, “transparency practice”, “interest‐free practice” and “100 per cent financing” are the first five decision criteria considered as being very important. The least preferred criteria, among others, are “recommendation”, “longer financing period”, “product range” and “branch location”. Results also suggested that a small number of significant differences are apparent in the importance of choice criteria with respect to gender, marital status and age range.

Research limitations/implications

The study contains three limitations. The first limitation was based on the sample area for the study which is confined to Labuan, Malaysia. Second, this study restricted the use of factor analysis since the data did not allow for aggregation. Third, this study was also unable to perform ANOVA for religion differences as the sample consisted largely of Muslims.

Practical implications

The results are primarily beneficial to academics and practitioners in Malaysia by offering an insight into choice criteria for Islamic home financing. This study provides new results about different kinds of customer types and their preferences with regards to Islamic home financing selection. As such, Islamic bank managers can learn and plan to offer attractive schemes for the Islamic home financing market that meet Malaysian bank customers' needs. For the researcher, this study contributes to existing body of knowledge by providing an investigation of choice criteria in the Islamic home financing. Indeed, this study is considered an “eye‐opener” for Islamic home financing choice criteria which has limited previous studies. Originality/value –This study introduces the choice criteria for Islamic financing among Malaysian bank customers. The study offers an insight into Islamic home financing choice criteria in Malaysia which has limited previously been investigated.

Details

International Journal of Housing Markets and Analysis, vol. 1 no. 3
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 7 September 2015

M.L.C. Herijgers and Henk L.W. Pander Maat

Complex decision-making is often supported not by single messages but by multichannel communication packages that need to be evaluated in their own right. The purpose of this…

Abstract

Purpose

Complex decision-making is often supported not by single messages but by multichannel communication packages that need to be evaluated in their own right. The purpose of this paper is to present a new analytic approach to this package evaluation task combining textual analysis, functional analysis (FA) and media synchronicity theory.

Design/methodology/approach

The authors combine textual analysis, FA and media synchronicity and demonstrate this in a single case analysis of a multichannel communication package offering mortgage information.

Findings

When applied to a mortgage communication package for consumers, the evaluation reveals significant problems concerning the contents and timing of mortgage information and the channels chosen to convey it.

Research limitations/implications

This paper outlines a new direction for evaluating multichannel consumer information, in that it does not focus on user channel preferences but on channel requirements stemming from the communicative task to be performed.

Practical implications

This paper enables designers to optimize the design of multichannel communication packages and its individual components to support customer’s decision-making processes with regards to complex products.

Social implications

Improving information to guide complex decision-making processes leads to better informed consumers.

Originality/value

Research into effective multichannel communication within marketing is in its infancy. This paper offers a new perspective by focusing on channel requirements stemming from the communicative task rather than consumers’ channel preferences.

Details

International Journal of Bank Marketing, vol. 33 no. 6
Type: Research Article
ISSN: 0265-2323

Keywords

1 – 10 of over 5000