Interdisciplinary Social and Community Studies

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other resources for buying a home. Mylonakis (2007b) .... Meet needs and desires with current resources, 2. Increase the assets ..... “Yatırım Yaparken Nelere.
VOLUME 8 ISSUE 3

The International Journal of

Interdisciplinary Social and Community Studies ________________________________________________________________________

"$POTVNFS,OPXMFEHFBOE#FIBWJPST UPXBSET#BOLJOH)PNF-PBOT GÜLAY GÜNAY, BURCU SAVAŞ, HIDAYET GÜNEŞ, AND ÖZGÜN BENER

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THE INTERNATIONAL JOURNAL OF INTERDISCIPLINARY SOCIAL AND COMMUNITY STUDIES thesocialsciences.com First published in 2014 in Champaign, Illinois, USA by Common Ground Publishing LLC www.commongroundpublishing.com ISSN: 2324-7576 © 2014 (individual papers), the author(s) © 2014 (selection and editorial matter) Common Ground All rights reserved. Apart from fair dealing for the purposes of study, research, criticism or review as permitted under the applicable copyright legislation, no part of this work may be reproduced by any process without written permission from the publisher. For permissions and other inquiries, please contact [email protected]. The International Journal of Interdisciplinary Social and Community Studies is peer-reviewed, supported by rigorous processes of criterionreferenced article ranking and qualitative commentary, ensuring that only intellectual work of the greatest substance and highest significance is published.

Knowledge and Reported Behavior towards Banking Home Loans in a Sample of Turkish Consumers Gülay Günay, Karabuk University, Turkey Burcu Savaş, Karabuk University, Turkey Hidayet Güneş, Karabuk University, Turkey Özgün Bener, Hacettepe University, Turkey Abstract: The main purpose of this study was to investigate consumers’ knowledge and behaviour towards using home loans. In recent years, the home loans market in Turkey has experienced great development. Especially the developments in economic structure of the country, banking sectors providing these services that encourage consumers to purchase houses; such developments have facilitated the use of home loans by consumers recently. Participations of this study consist of consumers who are getting loans, home loans, or are thinking about getting home loans in Karabuk city in Turkey. The sample size is determined by using the simple random sampling method (N=414). Results stated that 84.1 percent of the consumers used home loans. Among the consumers who use home loans (n=359) payback period average is found to be around 8 years. 51.7% of the participation has determined that using home loans decisions are made with their family members. According to the results of the study, it was found that the factors that affect the use of home loans average were high degree (4.5±0.5). 79.5% of the consumers stated that they go to banks to get information about home loans while 46.1% of them use the internet to be informed. The result of hierarchical multiple regression analysis revealed that demographic characteristic (education, income and job), and attitudes towards home loans and financial management behaviour were important predictors of consumers’ behaviour and knowledge towards using home loans. Based on these findings some recommendations are made. This paper may be beneficial to consumers, policymakers, and consumer educators in their study of strategies for improving the roles of consumers in protection of the consumers and their sustainable rights. Keywords: Consumer, Loans, Home Loans, Mortgage, Home Mortgage

Introduction

I

n this economy, the housing and real estate sector is always considered to be a priority. In Turkey, it involves factors such as rapid population growth, the extent of migration from rural areas to the urban, the need to restore existing housing, the earthquake risk, frequent changes in construction and housing plans, and the need for urban transformation (Yükseler, 2009:4). Houses provide financial assurance for society’s individuals and for families, and houses may be seen as an instrument of investment (Yükseler, 2009:4; SPK, 2012:13). For that reason, housing is regarded as a traditional investment instrument for individuals and families (Development Bank of Turkey, 2008; Haavio & Kauppi, 2011). However, consumers prefer to buy their homes with home loans, since their incomes and savings often cannot cover the costs of their housing needs (Tunalı, 2008:101; Castellani & DeVaney, 2001:12; Krizek, 2003:658). One of the most frequent ways that consumers choose to buy a home is the loan provided by banks. In the most general sense, the “home loan” refers to loans that are offered for the use of “individuals” to finance the purchase of houses from third parties with non-commercial purposes on condition of being repaid on certain terms and conditions (Karakoç, 2008:47). In other words, the home loan is cash money that consumers take from a creditor with the purpose of buying a home (TBB, 1995). Looking over the history of housing finance offered by banks in Turkey; it can be seen that, until 1989, no bank gave home loans except the Emlak Bankası (Mortgage Bank) which was a specialized bank, and as of 1995, only 9 of the 36 national and 19 foreign-capitalized banks offered home loans. As banks starting to offer home loans after 1995 could not distribute their The International Journal of Interdisciplinary Social and Community Studies Volume 8, 2014, thesocialsciences.com, ISSN: 2324-7576 © Common Ground, Gülay Günay, Burcu Savaş, Hidayet Güneş, Özgün Bener All Rights Reserved Permissions: [email protected]

THE INTERNATIONAL JOURNAL OF INTERDISCIPLINARY SOCIAL AND COMMUNITY STUDIES

funds within the trading area without state subsidies, they did not tend to the home loans market and they considered it rather as an alternative (Kızıltepe, 2011:114). During this period, the reasons why home loans were not taken into consideration sufficiently included insufficient economic growth (1989-1999, 3.7% on average), chronic high inflation rates (1989-1999, 72.76% in average) and high interest rates (over 100%) (TSI, 2010: 582). As a housing finance system which enables people with low-incomes to own their own homes by offering long-term (25-30 years), fixed and low interest loans, the mortgage has passed into law in Turkey in 2007 (Tunalı, 2008:100). Loan institutions give an opportunity for people who wish to buy a home, offering loans up to 75% of the price of the house, to repay this amount in monthly equal instalments, over the course of up to 30 years (Aktaş, 2008:1). The main objective of the mortgage system is to enable people who want to have a house, or to renovate one, to use long-term loans, and offer fund for new loans by means of turning these loans into cash as soon as possible (Mylonakis, 2007a:158). However, on account of the fact that interest rates are high and economic expectations are not yet at an encouraging level, the mortgage system is not fully embraced by Turkey’s consumers (Aktaş, 2008:2). Consumers are influenced by many factors when deciding whether to take out a home loan for the purposes of buying a home. The primary factors are as follows; income, wealth level, interest rate, prices, expectations, inflation, education, jobs and ages of the individuals, technology and socio-cultural factors (Tarı ve Pehlivanoğlu, 2007:194; Demir, Kurt, and Cagdas, 2003). The reasons for the consistent variations in the rates of home loan usage over the years are the pressures of economic forces such as changes in economic balances, an increase in unemployment rate, changes in purchasing power, mounting tax burdens, changes in state policies, the variability of interest rates, and the complexity of the consumer market (Bailey, 1987:14; Raijas, 2011:57; Mylonakis, 2007a:158; Essene & Apgar, 2007:11; İbicioğlu & Kara, 2012:66). Besides, technological developments, increasing competitive pressure and the constant changes of existing information offer a wider choice in home loans and different sources of advice for the consumers (mass communication tools, co-workers, previous users etc.) (Vijayakumar & Subburaj, 2012:184; Mylonakis, 2007a:157). In recent years, many researchers have conducted various types of research to investigate consumer use of the home loan and the problems they encounter while using the loans in relation to variables. In that research, many demographic, socio-economic and socio-cultural factors, ones that can be effective on consumer behaviors related to the use of the home loan have been analyzed. According to the results of the survey conducted by Vijayakumar & Subburaj (2012) on 531 consumers, to investigate the factors that affect consumer decisions while getting home loans in India; the educational and income level of the consumers were found to be effective in home loan choice. In the same research, it is detected that media advertisements, the attitudes of consumers who had used home loans previously, and the attitudes and behaviors of bank staff have effects on the information processes of the consumers. It is revealed that couples (86.8%) have an important role in the decision of the home loan usage. It is found that in bank choice, various factors such as flexibility, the interest rate, and the purchasing process of the home loan are effective. In a research conducted by Vijayakumar & Subburaj (2010) on 281 consumers using home loans in India, it is found that consumers prefer variable interest rates as they could not understand the difference between variable and fixed interest rates. Researches have investigated and examined the process or problems of home loans or mortgage from different perspective such as politicians, banking sectors or consumers. For example Yiğit (2009) reported that interest rates, low commission rates, bureaucratic means, the attitude and behavior of bank staff, the location of the bank and its prestige are important factors with respect to the home loans that consumers want to take out. Oymak (2009) has examined the relationship between home loans and other sectors by using the three-month figures. According to the results of the research conducted by Berberoğlu (2009) to determine 300 consumers' use of home loans, it is revealed that 88.3% do not use a home loan, while the rate of those who use a

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GÜNAY ET AL.: A CONSUMER KNOWLEDGE AND BEHAVIORS TOWARDS BANKING HOME LOANS

home loan is 11.7% which is a very low rate. In the research conducted by Piar Gallup in 1991 in Turkey, it was found that among households with their own homes, 35.6% of them acquired their homes by paying cash, 27% through inheritance, 7.9% by means of housing cooperatives and only 2.7% became homeowners by means of a home loan (Teker, 2000:82). On the other hand, in research conducted by Yalçın et al. (2009) in İstanbul in order to measure 150 consumers’ home buying tendencies; it was found that consumers preferred to use bank loans (58%) more than other resources for buying a home. Mylonakis (2007b) conducted a research to determine the attitudes of consumers towards using home loans, their knowledge sources on the use of home loans, and the choice criteria used by consumers to choose home loans and financial institutions. In another research, Mylonakis (2007a) detected that 97.3% of 183 consumers use at least one of the loan types offered by banks, and the rate of those who use home loans is 20%. Devlin (2002) investigates the relative importance of choice criteria according to consumers, and also analyses the differences in the importance of choice criteria with respect to a number of demographic and related factors. The study shows that choosing a home loan institution on the basis of professional advice is the most frequently cited choice criterion, closely followed by interest rates. Differences in the importance of choice criteria with respect to gender, class, household income, educational attainment, ethnicity and financial maturity are apparent. Johnson et al. (2010), stated that 30% of American houses have mortgage debts at an amount overcoming their current market price. Finally, the housing sector is one of the most important factors in the economic development of a country. This is because investment in housing plays an important role in economic development as it affects other related sectors directly or indirectly. Apart from the increasing need for housing in Turkey, the fact that consumers regard a house as a significant investment instrument due to the changing economic factors has recently contributed to the growth and development of the housing sector. Today, consumers may face many economic pressures within the social and economic environment they live. Consumers act in an environment of financing system which includes the pressure of the various economic powers, so they fail to save money. As an alternative for this situation, banks expand their range of products and services in line with the increase in the housing demand. In this direction, consumers prefer to meet their housing needs by means of the home loans. For this reason, the aim of the present research is to investigate consumers; use of the home loan, attitudes towards home loans usage, the knowledge and behaviours on the home loans usage, the relationship between consumer attitudes and behaviours towards home loans usage, financial behaviours and financial satisfaction.

Method Sample The present research was conducted in the province of Karabük, Turkey. One hundred and ten thousand people live in the city centre of Karabük (TSI,2012). Karabük is selected as the source of the research population due to the fact that it is a developing province in which many ethnic and cultural groups live together. 450 consumers were interviewed in the research. The authors had randomly selected 450 consumers living in the centre of Karabuk city. A total of 414 (female=124, male=290) interviews were conducted with an approximate 92 percent participation rate. Data were collected between November 1 and December 18 of 2012. The age of consumers taking part in the research ranges between 20 and 75 years, and the average age is 41. Seventy percent (n=290) of the consumers are males and 30% (n=124) are females. Of the consumers, 88.4% are married (n=366), and their marriage years range between 1 and 44 years. The average number of children the consumers have is 2. The monthly income of the consumers varies between 300 € and 4274 € and the average monthly income is 1501 € (1 € is equivalent to about 2.51 TL - June, 2013). It is found that 4.6% of consumers are servants,

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THE INTERNATIONAL JOURNAL OF INTERDISCIPLINARY SOCIAL AND COMMUNITY STUDIES

13.3% are employees, and 11.4% are self-employed. Seventy two percent of consumers have their own houses (Table 2.1.). Table 2.1: Demographic Variables Demographic Variables

Min.

Max.

Mean

SD

Age Marriage length Number of children Monthly family income Marital Status Single Married Education Primary School Secondary school University Master's Degree and more Working status Homemaker Retired Employee Self-employed Servant Homeowners status Rent The house is our relatives Lodging Our own

20 1 0 650 F 48 366

75 54 8 10000 % 11.6 88.4

40.6 16.6 2.0 3513

10.2 10.9 1.1 1748.3

35 92 261 26

8.5 22.2 63.0 6.3

21 28 55 84 226

5.1 6.8 13.3 20.3 54.6

61 35 20 298

14.7 8.5 4.8 72.0

Instruments Consumers are influenced by many factors when deciding whether to take out a home loan for the purposes of buying a home. The primary factors are as follows; income, level of wealth, interest rates, prices, expectations, inflation, education, occupations and ages of the people, savings, consumer habits, technology and socio-cultural factors (Tarı ve Pehlivanoğlu, 2007). All variables in this analysis are self-reported measures. Independent variables: Independent variables are gender, age, marital status, length of marriage, family income, level of education, occupational status, and ownership status of house. Consumer behaviours and knowledge levels on home loan usage: In this section, a form consisting of 11 items including statements such as "getting information about the interest rate of home loans”, and “the important of the bank’s prestige" was prepared in order to investigate the "behaviours and knowledge levels of consumers, who used or planned to use a home loan, with regard to home loan usage". People who participated in the survey were asked to evaluate these items with one of the options, between "5=very important, 1=not important at all". A high score obtained from this form is an indicator of adequate knowledge on home loans; a low score is an indicator that the knowledge level on home loans is not adequate and consumers face challenges in the use of home loans. Consumers’ attitudes towards home loan usage: This scale consisting of 18 items was prepared by the researchers in order to measure the attitudes of consumers on the use of home loan. In this scale, there are statements such as, "I find the interest rates of home loans high in our

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GÜNAY ET AL.: A CONSUMER KNOWLEDGE AND BEHAVIORS TOWARDS BANKING HOME LOANS

country" and "I believe that the increase in competition between banks will affect the home loan market positively". It is a Likert-type scale consisting of five options from "completely agree=5" to "completely disagree=1". Consumers’ financial satisfaction: Financial satisfaction was measured with an 8-item-form developed by Hira & Mugenda (1998). In this study, responses were obtained from a series of statements seeking respondents’ satisfaction with various aspects of their financial situation. These aspects included satisfaction with: 1. Meet needs and desires with current resources, 2. Increase the assets and improve the quality of life, 3. Regular monetary savings, 4. Current debt level, 5. Family’s current financial situation, 6. Ability to meet long-term financial goals, 7. Ability to meet financial emergencies, and 8. Money management skills. The responses were recorded on a five-point Likert Scale ranging from 1=Very Dissatisfied to 5=Very Satisfied. For the inferential statistics, the whole scale was used, and items were summed, to obtain a financial satisfaction index (Hira and Mugenda, 1998). According to Hira & Mugenda (1998), the Cronbach’s alpha for the SELs was .89. But in this study Cronbach’s alpha coefficient was found .75. Financial management behavior scale (FMBS): The scale was developed by Dew and Xiao (2011) with the purpose of determining the financial management behaviours of individuals. The scale is prepared as a 5 point Likert-type consisting of 15 questions in which there are statements such as, "I make comparisons (price-quality) while buying a product" and "I pay all my bills on time". The objective of the scale is to determine the frequency of these activities within the previous 6 months. Other options in the scale are between "1=never" and "5=always". This scale consists of 4 factors, namely, 1) saving and investment behaviours, 2) cash management, 3) credit management and 4) insurance behaviour. These four factors explain 59% of the total variance. Dew and Xiao (2011) found that the loading value of items appearing in the survey is between .66 and .85. Practices to adapt the scale to Turkish culture were carried out by Günay, Aydıner Boylu (2013) with their research conducted with 696 people. It is found that the Cronbach’s alpha internal consistency coefficient of the scale is .83; item total correlations are between .55 and .87. As in the original research, the scale consists of 4 factors. It was found that all of the 4 factors together explain the 67.4% of total variance of the scale. The Cronbach’s alpha for the FMBS was .82.

Data Analysis The information obtained by means of the survey form in the present research was analysed using the statistical package programme, “SPPS for Windows 15.0". Firstly, the frequency distribution was determined for all questions. Averages and standard deviations of data to be used in the research were calculated. Correlation analysis was performed to determine the level and direction of the relationship between the dependent and independent variables, and Hierarchical Regression Analysis was used to determine the sequence of contribution for the variables. In this approach, independent variables are put into the regression analysis in a certain sequence to determine the model that best describes the dependent variable. Multiple Regression Analysis was used to determine in what order variables contributed. In that approach, independent variables are put into the regression equation in a certain order to determine the model which explains the dependent variable in the best way. Hence, it is possible to find the variation generated by total effects (Büyüköztürk, 2007: 31).

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THE INTERNATIONAL JOURNAL OF INTERDISCIPLINARY SOCIAL AND COMMUNITY STUDIES

Findings According to Table 3, before buying a home, more than half of the consumers (61.6%) stated that they used home or consumer loans offered by banks; 25.1% stated that they used both their savings and home loans. The repayment terms of the loans that the consumers (n=359) used ranged between 1 and 15 years, and it is observed that 8-year repayment terms are used on average. The rate of consumers who stated that they had applied to bank branches to research home loan usage is high (79.5%). Forty six point one percent of consumers researched home loan usage on the internet, and 32.4% asked friends and relatives who had used home loans before. The rate of consumers who stated that they decided to use a home loan consulting with family members is 51.7%, and the rate of those who decided consulting with their spouses is 23.7%. 44.7% of consumers had the home loan services from private banks; 40.8% used the home loan services of state banks (Table 3.1.) Table 3.1: Consumer Behaviors of Home Loans Usage Variables Home Purchase Situation No Inheritance Yes, with bank credit Yes, with my saving Yes, with my savings and home loan Type of using credit (n=359) Home Loan Mortgage Before using the home loan have been research No From TV Ads. From Newspaper Ads. From Internet From telephone banking From relatives and friends From bank branches Economic Decision Making Always man Always women Always man and woman together Sometimes woman, but mostly man Sometimes man, but mostly woman Bank selection State Bank Private Bank Financial Institution

F

%

31 6 255 18 104

7,5 1,4 61,6 4,3 25,1

348 11

84,1 2,7

11 32 1 191 7 134 329

2,7 7,7 0,2 46,1 1,7 32,4 79,5

27 11 9 98 214 N 169 185 5

6,5 2,7 2,2 23,7 51,7 % 40,8 44,7 1,2

After analysing the knowledge levels and behaviours of consumers on home loan usage and the correlations between demographic variables (age, monthly family income, educational level and occupation), conditions for buying a home, the payback period of the home loan, the way of taking a decision to use a home loan, the financial satisfaction level, financial management behaviour; it is found that there is a significant and positive relationship between the knowledge

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GÜNAY ET AL.: A CONSUMER KNOWLEDGE AND BEHAVIORS TOWARDS BANKING HOME LOANS

and behaviours of consumers on home loan usage and age (β=.10 p