Financial literacy: a barrier to home ownership for the young?
The decision to buy a home is one of the most important choices faced by a household. Most young households who purchase a home do so using a mortgage. But mortgages are complex financial instruments and this complexity may be a barrier to less sophisticated households becoming homeowners. Using sur...
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| Format: | Article |
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Elsevier
2017
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| Online Access: | https://eprints.nottingham.ac.uk/40344/ |
| _version_ | 1848796033867317248 |
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| author | Gathergood, John Weber, Jörg |
| author_facet | Gathergood, John Weber, Jörg |
| author_sort | Gathergood, John |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | The decision to buy a home is one of the most important choices faced by a household. Most young households who purchase a home do so using a mortgage. But mortgages are complex financial instruments and this complexity may be a barrier to less sophisticated households becoming homeowners. Using survey data from a sample of English and Welsh households we measure household financial literacy related to mortgages, including concepts such as loan duration, interest compounding and amortization. We find that in the population mortgage financial literacy is generally low and among renters mortgage financial literacy is substantially worse than among homeowners. Econometric estimates show mortgage financial literacy predicts home ownership for younger, but not for older households. Financial literacy also affects the type of mortgage and leverage position of younger households. Young homeowners with poorer financial literacy take on larger mortgage debts and are more likely to use alternative mortgage products. |
| first_indexed | 2025-11-14T19:41:33Z |
| format | Article |
| id | nottingham-40344 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:41:33Z |
| publishDate | 2017 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-403442020-05-04T18:35:21Z https://eprints.nottingham.ac.uk/40344/ Financial literacy: a barrier to home ownership for the young? Gathergood, John Weber, Jörg The decision to buy a home is one of the most important choices faced by a household. Most young households who purchase a home do so using a mortgage. But mortgages are complex financial instruments and this complexity may be a barrier to less sophisticated households becoming homeowners. Using survey data from a sample of English and Welsh households we measure household financial literacy related to mortgages, including concepts such as loan duration, interest compounding and amortization. We find that in the population mortgage financial literacy is generally low and among renters mortgage financial literacy is substantially worse than among homeowners. Econometric estimates show mortgage financial literacy predicts home ownership for younger, but not for older households. Financial literacy also affects the type of mortgage and leverage position of younger households. Young homeowners with poorer financial literacy take on larger mortgage debts and are more likely to use alternative mortgage products. Elsevier 2017-02-09 Article PeerReviewed Gathergood, John and Weber, Jörg (2017) Financial literacy: a barrier to home ownership for the young? Journal of Urban Economics, 99 . pp. 62-78. ISSN 0094-1190 Home ownership; Financial literacy; Mortgages; Household finance http://www.sciencedirect.com/science/article/pii/S0094119017300062 doi:10.1016/j.jue.2017.02.001 doi:10.1016/j.jue.2017.02.001 |
| spellingShingle | Home ownership; Financial literacy; Mortgages; Household finance Gathergood, John Weber, Jörg Financial literacy: a barrier to home ownership for the young? |
| title | Financial literacy: a barrier to home ownership for the young? |
| title_full | Financial literacy: a barrier to home ownership for the young? |
| title_fullStr | Financial literacy: a barrier to home ownership for the young? |
| title_full_unstemmed | Financial literacy: a barrier to home ownership for the young? |
| title_short | Financial literacy: a barrier to home ownership for the young? |
| title_sort | financial literacy: a barrier to home ownership for the young? |
| topic | Home ownership; Financial literacy; Mortgages; Household finance |
| url | https://eprints.nottingham.ac.uk/40344/ https://eprints.nottingham.ac.uk/40344/ https://eprints.nottingham.ac.uk/40344/ |