The Swedish Case: Mortgage Preferences Among Home Owners

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 2012. Through binary logistic regression, the effects of loan-to-value (LTV), age, education, income and risk aversion on household mortgage decisions are investigated. In addition, consumers' ability to handle sudden mortgage rate increases are examined together with five attitudinal questions on factors influencing the mortgage decision.The results show that higher LTV, a lower level of education, higher age, lower income, high risk averseness influence Swedish consumers to choose FRMs, while having trouble handling interest rate increases promotes the choice of ARMs. Four of the five attitudinal statements that was tested non-directional did make a statistically significant contribution to the model.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 attitudes in understanding consumers' financial choices and elucidates the Swedish case.