Research suggests older mortgage borrowers may be paying more for loans

Didier Malagies • March 20, 2023


There exists a link between the age of a mortgage borrower and the interest rate they are paying in their loan, and while age-based discrimination could be a factor, not enough information could make such a determination.


However, there is a possibility that a lack of comparison shopping could result in older mortgage borrowers paying more for their loans. This is according to a new research brief published by the Boston College Center for Retirement Research (CRR).


Following up on previous research that suggested a link between borrowers’ age and application rejection rates, the latest research from CRR aimed to determine if older borrowers actually end up paying more for mortgage financing.


“In today’s aging society, it is important to understand whether aging affects an individual’s access to credit,” the brief said. “The first brief in this series concluded that older mortgage applicants were more likely to be turned down for a loan than their younger counterparts – and this effect was both statistically significant and large. One plausible reason for this relationship is that lenders could be taking into account the costly effects of age-related mortality risk when making loan decisions.”


When aiming to examine whether interest rates charged on home loans varied based on a borrower’s age, it did find a link but the effect was far more modest than the one observed in the previous brief.


“Specifically, for home purchase mortgages, older loan recipients paid an additional 8 basis points, compared to a base cost of 391 basis points,” the brief explained. “This difference in rates by age could potentially be explained by consumer behavior; for example, older borrowers may do less comparison shopping for the best rate.”


There are costs — physical, mental and financial — that are associated with comparison shopping, which might indicate why older borrowers are less likely to engage in it, the brief said.


“Since search can be costly, it is plausible that, due to a higher likelihood of physical or mental fatigue and technology aversion, older borrowers perform a less comprehensive search of potential lenders than younger borrowers,” the brief said. “Therefore, older borrowers end up receiving less favorable coupon rates because they cannot provide competing rates for lenders to match.”


There could also be age discrimination at play, but the data was not strong enough to either rule in or rule out such discrimination as a cause for the observed rate discrepancy, the brief said.



Women were also “consistently” more likely to pay more than their male counterparts, the research said, but more specific work would need to be undertaken to determine the cause for this trend, according to the brief.


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