The importance of past experiences and social status for mortgage holders interest rate choices

The subprime related global financial crisis just seen has brought with it a number of international studies investigating factors influencing householdsí mortgage rate choice. These studies focus primarily on contract factors or are explorations of consumer financial literacy as an important aspect in understanding which factors underlies the outburst of the crisis. Pre-crisis studies have also focused on a number of consumer characteristics, such as age, income, education and risk aversion. Since the choice of mortgage interest rate often have a great impact on a householdís financial situation and sub-optimal choices have been reported, this study brings forward the experiences of financial advisers and consumer narrated experiences as a way of contributing to a better understanding of consumer characteristics underlying mortgage choices. The study originated as a pre-study of a larger nation-wide survey, but the findings have been found interesting enough to report on separately. The report is based on 20 interviews with financial advisers and 10 observations of encounters between advisers and customers at bank branches. Mortgage choice was in focus for the interviews and also part of what was discussed during the advisory sessions reported on. The paper also reports on three focus groups with mortgage holders with different previous experiences of having mortgages. The study has been conducted in a Swedish context in January/February 2012. The chosen qualitative perspective offers new findings that are thought of interest for future research. The results show the importance of social status as a neglected but important factor influencing consumer mortgage choice. Other factors of interest for the mortgage decision found during this qualitative study are generation affiliation and with it earlier experiences of mortgages and of market fluctuations.