Mortgage delinquency during COVID-19: do financial literacy and personality traits matter?

Abstract

PurposeMortgage delinquency has become a major crisis following the COVID-19 pandemic. This study explored mortgage delinquency antecedents, focusing on two individual-level factors: financial literacy and personality traits.Design/methodology/approachUsing a large sample of 2,511 consumers, we examined the direct effect of financial literacy and its interaction with personality traits to predict mortgage delinquency based on logistic regression analysis. We further provide several robustness tests to validate our findings.FindingsWe find that financially literate consumers are 6% less likely to delay their mortgage repayment during the COVID-19 pandemic. Moreover, personality traits such as neuroticism and extroversion positively and conscientiousness negatively moderate the given linkage between financial literacy and mortgage delinquency.Practical implicationsBanks and financial companies may devise relevant policies to reduce mortgage repayment by knowing the interplay between financial literacy and personality traits. Personality traits can be considered one of the parameters while sanctioning mortgages to prospective customers.Originality/valueOur research examines the linkage between financial literacy, personality traits and mortgage delinquency based on a large nationally representative sample. Our findings suggest that personality traits moderate the effect of financial literacy on mortgage delinquency.

Are financially illiterate individuals all the same? A study on incorrect and “do not know” answers to financial knowledge questions

“…, 2021). Some recent studies show that during the COVID-19 pandemic consumers with higher objective FK were also less likely to delay their mortgage repayments (Chhatwani, 2022). There is also research evidence that subjective FK often influences both long- and short-term financial behaviours more than objective FK (Robb and Woodyard, 2011; Xiao et al ., 2011; Henager and Cude, 2016; Anderson et al ., 2017; Bialowolski et al ., 2021).…”

“…For example, previous studies show that in both developed and developing countries (Hasler and Lusardi, 2017), individuals with higher objective FK are less indebted (Lusardi and Tufano, 2015), are better able to save and to build assets (Letkiewicz and Fox, 2014), choose low-interest mortgages (Moore, 2003), plan for their retirement Mitchell, 2007a, b, 2011;Bongini and Cucinelli, 2019;Xu et al, 2022;Gallego-Losada et al, 2022), are less financially fragile (Chhatwani and Mishra, 2021) and show greater financial well-being (Tahir et al, 2021). Some recent studies show that during the COVID-19 pandemic consumers with higher objective FK were also less likely to delay their mortgage repayments (Chhatwani, 2022). There is also research evidence that subjective FK often influences both long-and short-term financial behaviours more than objective FK (Robb and Woodyard, 2011;Xiao et al, 2011;Henager and Cude, 2016;Anderson et al, 2017;Bialowolski et al, 2021).…”

Gender-related effects of financial knowledge and confidence on preferences for ethical intermediaries and sustainable investments

“…However, the empirical evidence is ambiguous, and although some studies highlight a positive impact of financial knowledge on SRI (Gutsche et al, 2023), others find a negative (Gutsche et al, 2021) or no impact (Filippini et al, 2022), stressing the need for more in-depth analyses. In particular, Phillips and Johnson (2021) show that inadequate financial competencies and lack of knowledge of sustainable financial markets are significant barriers to SRI, in line with the general consideration that higher levels of financial knowledge are associated with more sustainable financial behaviours (Aristei and Gallo, 2021;Chhatwani, 2022;Cucinelli and Soana, 2023b) and higher financial well-IJBM 42,3 being and resilience (Lusardi and Tufano, 2015;Brent and Ward, 2018;Riitsalu and Murakas, 2019;Chhatwani and Mishra, 2021;Bialowolski et al, 2022). Gutsche et al (2023) also demonstrate that financial literacy is an important driver for sustainable investments and exert a positive effect on the amount invested in sustainable funds, while they underline how excessive processing and information costs represent an important barrier to SRI.…”

Personality traits and conflict management styles via job performance in higher education

“…Secondly, contextually, the previous researchers did not focus on the academic leaders of Pakistan's HEIs, and this topic still needs serious consideration. Finally, in the COVID-19 scenario, when PTs have played significant roles in resolving online issues of conflict (Chhatwani, 2022), the individuals become more pro-social (Balmori de la Miyar et al, 2022). Therefore, based on relationships between the academic leaders of Pakistan's HEIs, we have tried to fill the above gaps by developing the model shown in Figure 1.…”