Mistakes that Marginalize. Vulnerable Households, Access to Housing, and Financial Advice

This paper examines the relationship between financial exclusion, mortgage lending, and access to housing. It highlights the ambivalent effects of mortgage loans on financial resilience of vulnerable consumers and emphasizes the need for a regulatory approach that considers the borrower’s entire personal balance sheet. Special attention is given to advisory services, which the paper considers a crucial but underutilized tool for enhancing financial resilience of low-net-worth households. Current EU financial regulation, however, lacks an integrated approach to evaluating consumers’ overall financial situations and links the assessment of personal balance sheets to specific needs (such as buying a house). Through a comparative analysis of advisory regimes in different financial markets, the paper identifies regulatory gaps and inconsistencies that undermine effective consumer protection. It then proposes a reformed, more holistic advisory framework tailored to the needs of financially fragile households and shows this could contribute to reduce the risk of financial mistakes.