Domesticating Finance: Patterns of Inequality in Living with Home Mortgages in Hungary
The way class correlates with investment decisions and the risk of foreclosure (cf., Bourdieu 2005, Immergluck and Smith 2006), and the way financial products, particularly home mortgages, deepen class inequalities is now a well-researched topic (cf., Hiltz, 1971, Rugh and Massey, 2010, Williams, et al. 2005). Separately, literature on market encounters considers the intricate ways in which ordinary consumers calculate and engage with financial products (cf.,Ronald, 2008, Deville, 2012, Langley and Leyshon, 2012, Coppock, 2013). For example, challenging the influential thesis on the one-sided “financialization of daily life” (Martin, 2010), we have previously argued that domestic life adjusts to mortgages not simply by adopting a financialized logic since mortgages are also “domesticated” in the process (Pellandini-Simanyi, et al., forthcoming).
In this paper we connect the two literatures by asking, what are the actual processes through which class affects the way people interact with and “domesticate” financial products? In particular, how do social inequalities play out when choosing, using and repaying or defaulting on mortgages? These effects are crucial after the collapse and sustained crisis of the Hungarian mortgage market, primarily due to Swiss Franc-denominated mortgages.
The paper seeks to answer this question through the analysis of 50 interviews with Hungarian mortgage borrowers (using quotas of income, education, residence and mortgage type), and 30 interviews with policy-makers, regulators and bank employees. We approach inequality from a cultural economy perspective, interested in the “distinction work” (Bourdieu, 1984, Hanser 2008) carried out not only according to one’s endowment with capital, but also through the operation of market mediators such as sales, services, and advertising (Allen, 2008; Atkinson, 2010; Ariztía, 2014, Mazzarella, 2003; Davila, 2001) and market devices (McFall 2014).
We start by noting two ambivalences about the concept of “class” in Hungary. First, the term is almost never used to classify one another (Róbert and Sági, 1995), leftover from the state-socialist doctrine of a “classless society” that suppressed discourse on inequalities (Ferge, 1979). Second, there is considerable “status inconsistency” so that class indicators—income, wealth, education, occupation—do not map onto homogeneous clusters (Róbert, 2000). Therefore, instead of assuming class as a self-evident analytical category, we identify concrete processes that made a difference in the way people domesticated finance, and study whether these relate to standard “class” indicators. Our concern is to assemble class from these differentiated experiences, rather than deduce them from a pre-defined category.
We identify three ways in which the mortgage market and “class” are related. First, select forms of inequality among borrowers—income, wealth, cultural and social capital—were reproduced and amplified at certain points of the mortgage trajectory (selecting, managing and paying off/defaulting), resulting in different forms of domestication. The strongest effect of these capitals is that they granted access to different types of mortgages and crisis restructuring plans. For example, the government-subsidized mortgages and subsequent debt-restructuring programs favoured middle and high-income groups (economic capital). Connections were essential for learning about low-rate mortgage opportunities (social capital), and knowledge of finance (a form of cultural capital) helped people compare the market offerings.
Even for borrowers of the same type of mortgage, these capitals translated into different domestication strategies, often in counterintuitive ways. The very same high-risk Swiss Franc mortgage was taken out by uneducated people who were not even aware that monthly instalments were tied to the exchange rate, and by people with financial and business background, who chose them because they were confident in their ability to “spot a good deal”. Similarly, how people coped with default on identical mortgages differed widely depending on whether or not they could mobilize their networks to raise funds and find extra income opportunities.
Second, domestication patterns of mortgages were influenced by factors that do not directly correspond to standard measures of inequality. Firstly, budgeting practices of the family’s older generations were a crucial factor in how people managed their mortgages. In fact, it was often the mid-20s borrowers’ parents who chose and partly paid the mortgage for them. Secondly, one’s aspired social position was much more important according to our interviews than the one actually occupied, and social networks pressured inequality gaps to be closed via mortgages. Finally, the quality of spousal and gender relations resulted in different ways of choosing and dealing with mortgages, which could be directly linked to defaults in many cases.
Third, we note that the mortgage lending system itself generated new dimensions of difference, cross-cutting and altering the existing inequalities. The type of mortgage (cheap and safe, fixed-rate state-subsidized mortgages vs expensive, variable-rate, risky, FX mortgages) did not simply depend on one’s income but on state-bureaucratic criteria and banks’ internal scoring systems. The state subsidy system distinguished between “families” (referring to married couples with children) and non-families, and gave preferential treatment to public servants. Banks initially took into account only declared income, while undeclared income started to count only later, when riskier (high loan-to-value, FX) mortgages swamped the market. These distinctions meant that people who would belong to the same “class” based on standard classifications, acquired access to very different types of mortgages. For instance, an entrepreneur with large undocumented income could get access to much worse mortgage terms than a public servant on smaller declared income. The very properties of these various mortgages, in turn, generated diverging mortgage experiences, which pertained to the social categories delimited by the state and banks, rather than to standard class categories.
The latter argument seems to fit the literature on gentrification and consumption-induced class formation theories (Savage, 2005), yet in this case we show that the novel distinctions that spin off from engagement with the mortgage market were not strategic or planned by market mediators (cf. Ariztia 2014). Rather, the inequalities follow on the one hand from the self-serving, calculative apparatus of mortgage banking which sorts individuals into risk categories and subsequently different products, and on the other hand from the way in which households interact with their mortgage devices in everyday life.