We propose a new, data-based test for the presence of biased financial advice when households choose between fixed and adjustable rate mortgages. If households are wary, the relative cost of the two types should be a sufficient statistic for a household contract choice: the attributes of the...

We propose a new, data-based test for the presence of biased financial advice when households choose between fixed and adjustable rate mortgages. If households are wary, the relative cost of the two types should be a sufficient statistic for a household contract choice: the attributes of the...

We build a model of the mortgage market where banks attain their optimal mortgage portfolio by setting rates and "steering" customers. "Sophisticated" households know which mortgage type is best for them, while "naïve" ones are susceptible to steering by their banks. Using data on the universe...