The impact of mortgage broker use on borrower confusion and preferences

Sol Chung, Julie Agnew, Hazel Bateman, Christine Eckert, Junhao Liu and Susan Thorp

Journal of Economic Behavior & Organization, 2024, vol. 224, issue C, 229-247

Abstract: We examine how mortgage brokers affect borrower confusion about key mortgage features and assess whether brokers mitigate confusion by educating borrowers. Drawing from two lab-in-the-field experiments, we first show a correlation between the attributes borrowers find most confusing and those they find least important. Second, we show that borrowers who secure loans directly from lenders demonstrate lower confusion levels compared to those using brokers, even after accounting for self-selection bias. Despite this, broker users exhibit higher decision satisfaction and confidence after taking a loan. Third, using responses from discrete choice experiments to implement a causal mediation analysis with a single IV, we evaluate the influence of broker use, financial literacy, and subjective confusion on borrowers’ willingness to pay for specific mortgage attributes. Our findings reveal that broker users are willing to pay more for attributes that increase the value and duration of loans, increasing broker commissions.

Keywords: Mortgage; Mortgage broker; Financial education; Financial literacy; Choice experiment; Stated preferences (search for similar items in EconPapers)
JEL-codes: G21 G41 G51 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268124001938
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:224:y:2024:i:c:p:229-247

DOI: 10.1016/j.jebo.2024.05.016

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().