Biases and Heuristics of Mortgage Lenders

The project looks at the concept of rationality and rational decision making that is different from what we usually assume in economics. In real life, differently from what theories assume, people have only limited time, knowledge and computational capacities with which to make financial and economic decisions. Depending on one’s view heuristics and biases can be seen as a negative thing leading to errors in decision making or a positive thing that makes decision making easier. A list of biases and heuristics include “Overconfidence”, “Availability”, “Anchoring and Insufficient Adjustment”, “Hot hand Fallacy”, “Gambler’s Fallacy”, “Familiarity”, “Framing”, “Gender” etc. 

The idea of this paper is to investigate these biases and heuristics that influence mortgage lenders, particularly toward first-time buyers.