“…First, to construct an objective measure of the extent to which an individual understands the key concepts in finance relevant for mortgage choice, and second, to do so in a design which is not mathematically complex and can be incorporated in a survey setting. The literature has documented that basic or 'core' financial literacy varies in the population and that variation in correct responses to relatively simple questions about finance can explain significant heterogeneity in observed choices related to consumer credit and debt (Lusardi & Tufano, 2009;Disney & Gathergood, 2013), retirement savings (Lusardi & Mitchell, 2007a, 2007bvan Rooij et al, 2011a) and stock market participation (Guiso & Jappelli, 2005;van Rooij et al, 2011b). These studies typically use question-based measures to measure individual understanding of, for example, compound interest or minimum payments on a credit product.…”