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Dealing with an Anchoring Bias in the Mortgage Market: A Regulatory Approach

  • Nelson Camanho
  • Ronit Levine-SchnurEmail author
  • Tal Farber
Chapter
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Abstract

This chapter investigates whether mortgage regulation assures proper decision-making by borrowers. It offers regulatory responses to mitigate a “mortgage illusion” phenomenon revealed in recent experimental studies. According to these experiments, buyers are influenced by the comparison between the monthly rental payment and the monthly mortgage installment for fixed-rate mortgages. Therefore, consumers are more likely to buy a house when the rent is higher than the mortgage installment. The chapter suggests that regulators account for this phenomenon when designing mortgage policies.

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  • Nelson Camanho
    • 1
  • Ronit Levine-Schnur
    • 2
    Email author
  • Tal Farber
    • 2
  1. 1.School of Economics and FinanceQueen Mary University of LondonLondonUK
  2. 2.Harry Radzyner Law SchoolInterdisciplinary Center HerzliyaHerzliyaIsrael

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