Gender and Mortgage Choice: More Evidence on Gender Based Risk Aversion

Abstract

We study the effect of gender in a new financial behavior context: the choice of a mortgage. While adjustable rate mortgages are initially cheaper, they expose the borrower to interest rate risk. Using national lender data, we find that propensity to apply for an adjustable rate mortgage among higher income applicants is 2.6-10 percentage points, or 10-50%, lower for women. Results are robust to inclusion of education and financial determinants of mortgage choice. We also find that among ARM applicants, women show propensity for contracts with longer initial fixed rate period. Results are consistent with past findings of females being more risk averse than males, as well as financial literacy increasing with income and wealth.

Keywords: mortgage choice, gender, risk aversion, financial literacy

JEL Classification: D1, G11, J16