Typically, income and credit scores are main factors in determining mortgage rates, but a new study from the Journal of Real Estate Finance and Economics suggests that gender plays a substantial role.
Brought to light by an AOL Real Estate piece by Ann Brenoff, the study sought to explain why, according to a study, women were 32 percent more likely than men to receive a subprime mortgage in 2006. Their conclusions were based not on discrimination, but on habit.
“Women pay higher rates because they are more likely to listen to friends’ recommendations, whereas men are more likely to shop around for the best deal,” Brenoff writes.
The report summarized that search efforts are rewarded in the marketplace, and because men spend more time searching for lower rates, they more often receive them in home loans.
“Gender disparity in mortgage rates may be addressed by policies aimed at improving women’s financial literacy and search skills,” the report stated.
Laura Rowley, a Daily Finance columnist, was quoted by Brenoff saying that the data made absolute sense to her.
“It’s not surprising, because mortgage shopping can be incredibly complex, so we look to people we can trust to help make the decision,” Rowley said. “But this is one area where you don’t want to get by with a little help from your friends.”
An HSH piece by Tim Manni similarly emphasized the familial connection. Quoting Lynette Khalfani-Cox, a fellow HSH contributor and “personal finance guru,” the article stated that women often inherit their financial advisors.
“It’s an affinity factor,” Khalfani-Cox said. “Many women are thinking: ‘If my mom, sister and friend all use this mortgage lender, why shouldn’t I?’”
And there’s also the issue of time. Khalfani-Cox said that often, women are simply too busy to spend a couple hours online scouring different financial institutions and calling representatives for the lowest rates.
“I’m not surprised at all by the study’s findings,” Khalfani-Cox said. “I don’t know a single woman who is not pressed for time. Listening to family and friends can simply be the path of least resistance.”
Interestingly, the conclusions of the Journal of Real Estate Finance and Economics report were entirely consistent with the original interpretations of the 2006 data. Allen Fishbein, the director of housing and credit policy at the Consumer Federation of America – the firm that conducted the 2006 study – said in a New York Times article that gender differences in mortgage hunting yielded different mortgage rates for the genders.
“Mr. Fishbein said the most likely reason for the disparity was that women were less familiar with the mortgage market than men and were therefore less likely to shop around for the best mortgage deal,” the article stated.
Fishbein was then quoted saying, ”There is some research indicating that women are, on the whole, less likely than men to bargain for major consumer purchases and credit transactions.”
What do you make of this? In your experiences, either as a lender or an agent working alongside banks and financiers, have you observed the same habits that both researchers seemed to have seen? Let us know by commenting below!