Financial Literacy, Present Bias and Alternative Mortgage Products
John Gathergood and
Jörg Weber (j.weber@exeter.ac.uk)
No 2015/03, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)
Abstract:
Policymakers have expressed concern that some mortgage holders do not understand or correctly choose their mortgage products, especially alternative mortgage products (AMPs) with back-loaded payments. Using a specially design question module in a UK survey, we investigate the impact of consumer financial sophistication on the decision to choose an AMP over a standard repayment mortgage. We show poor financial literacy and present bias raise the likelihood of choosing an AMP. Financially literate individuals are also more likely to choose an adjustable rate mortgage, suggesting they avoid paying the term premium of a fixed rate mortgage.
Keywords: mortgage; financial literacy; present bias; alternative mortgage products (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)
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https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2015-07.pdf Revised version 2015-07 (application/pdf)
Related works:
Journal Article: Financial literacy, present bias and alternative mortgage products (2017)
Working Paper: Financial Literacy, Present Bias and Alternative Mortgage Products (2015)
Working Paper: Financial Literacy, Present Bias and Alternative Mortgage Products (2015)
Working Paper: Financial Literacy, Present Bias and Alternative Mortgage Products (2015)
Working Paper: Financial Literacy, Present Bias and Alternative Mortgage Products (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:15/03
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