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Mortgage decisions in Swedish housing co-operatives

Maria Hullgren (Centre for Banking and Finance, Royal Institute of Technology, Stockholm, Sweden)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 17 August 2017

Issue publication date: 5 September 2017

236

Abstract

Purpose

This paper aims to highlight co-ops mortgage choice strategy and factors that influence the board’s master mortgage decisions in Swedish co-op associations.

Design/methodology/approach

Data are collected through a pre-study interviewing chair persons in co-ops in Stockholm followed up by a more extensive questionnaire. Answers from these are tested by logistic regression and compared to hypotheses based on earlier findings on mortgage choice on a household level and additional findings from the interviews.

Findings

The mortgage choice in co-ops seems to be more dependent on financial similarities than physical location. Loan-to-value (LTV) ratios have a dominant influence in that co-ops with high LTV ratios have a lower preference for adjustable-rate mortgages (ARMs). When checking for location, the media and individual chair persons also seem to affect the choice. Overall, there seems to be awareness in co-ops boards about the potential financial effects of their mortgage choice.

Practical implications

The negative connection between high LTV ratios and ARMs implies that boards try to make their mortgage expenditure more predictable. This reduces liquidity risks which may be of importance for financially constrained owners. Findings indicate that co-ops are risk averse and that the short-term threat for increasing interest costs is low. This is of value to both homebuyers and the financial industry.

Originality/value

This paper examines factors influencing mortgage choices in an organizational context such as co-op associations. The master mortgage in a co-op can have major influence on members financial situation but, to the author’s knowledge, a similar study has never been done before, neither in an international nor a Swedish context.

Keywords

Citation

Hullgren, M. (2020), "Mortgage decisions in Swedish housing co-operatives", International Journal of Housing Markets and Analysis, Vol. 10 No. 4, pp. 572-584. https://doi.org/10.1108/IJHMA-01-2013-0002

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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