Feeling Comfortable with a Mortgage: Enhancing Financial Literacy through Framing and Advice

Susan Thorp’s academic paper, “Feeling Comfortable with a Mortgage: The Impact of Framing, Financial Literacy and Advice,” has been recognised as the runner-up for the Best Academic Paper at the Money Awareness and Inclusion Awards (MAIA) 2024. This groundbreaking research delves into how framing, financial literacy, and professional advice influence borrowers’ comfort with mortgage debt, ultimately helping them make better financial decisions.

“Susan Thorp’s research provides invaluable insights into the psychological and educational aspects of mortgage decision-making,” says Trudi Harris, co-founder of the MAIAs. “Her work is crucial for improving financial literacy and helping individuals navigate the complexities of mortgage loans.”

Target Community: Borrowers in Multiple Countries

Thorp’s study focuses on borrowers in multiple countries, with primary data collected from Australia. The target community includes individuals from diverse backgrounds, varying levels of financial literacy, and different experiences with mortgage brokers. The research aims to understand how these factors influence borrowers’ comfort and decision-making regarding mortgage debt.

“Our study seeks to identify the factors that help borrowers feel more at ease with their mortgage decisions,” explains Susan Thorp. “We hope to provide insights that can improve financial education and support for borrowers globally.”

Making Money Accessible and Beneficial

The core of Thorp’s research examines how financial literacy and the way mortgage information is framed impact borrowers’ comfort with debt. The study uses an online survey to test participants’ understanding and comfort with mortgage debt, considering factors like financial literacy and whether the loan is presented as a lump sum or as a series of repayments.

“Our findings show that financial literacy plays a significant role in how comfortable people feel with mortgage debt,” Thorp notes. “Literate participants are better able to understand and match repayment streams with equivalent lump sums, making them less sensitive to how the information is framed.”

The research also highlights the positive impact of consulting mortgage brokers. Borrowers who seek professional advice tend to feel more comfortable with their debt and are less influenced by the framing of the loan. This underscores the importance of accessible, reliable financial advice in helping individuals make informed mortgage decisions.

Innovation and Impact

Thorp’s study is innovative in its use of psychological framing and financial literacy as lenses to examine mortgage comfort. By exploring these dimensions, the research provides a deeper understanding of how borrowers perceive and manage debt. The study’s methodology includes endogeneity-controlled regression analysis, which strengthens the validity of the findings.

“Our research offers a new perspective on the importance of financial literacy and professional advice in mortgage decision-making,” Thorp explains. “By addressing these factors, we can help borrowers make more informed choices and reduce the likelihood of costly mistakes.”

The impact of Thorp’s research is far-reaching. The findings suggest that improving financial literacy and access to professional advice can significantly enhance borrowers’ comfort with mortgage debt, leading to better financial outcomes and greater overall financial well-being.

Expanding Financial Literacy

Looking ahead, Thorp plans to expand the scope of her research to include more diverse populations and explore additional factors that influence mortgage comfort. She aims to develop educational tools and resources based on the study’s findings to further enhance financial literacy and support for borrowers.

“Susan Thorp’s work is a powerful example of how academic research can drive positive change in financial education and decision-making,” concludes Michael Gilmore, co-founder of the MAIAs. “This work should have implications for policy-making – and be required reading for mortgage issuers!”