A recent report from the U.S. Treasury’s Office of Financial Research reveals that lower-income households are increasingly using gains from cryptocurrency investments to access mortgages. Authored by researchers Samuel Hughes, Francisco Ilabaca, Jacob Lockwood, and Kevin Zhao, the study highlights a transformative trend in borrowing patterns within high-crypto exposure areas.
Leveraging Crypto for Mortgage Access
The report, published on November 26, notes that households in regions with significant cryptocurrency activity are utilizing profits from crypto sales to make larger down payments, enabling access to bigger mortgages.
“Crypto sales may have supported access to larger mortgages through bigger down payments,” the researchers stated.
Surge in Mortgage Activity in High-Crypto Areas
Data from the study indicates a significant uptick in mortgage activity in areas classified as “high-crypto zip codes,” where over 6% of households reported a crypto-related tax event.
- Mortgage Growth: The percentage of low-income households with mortgages in these regions rose by 250%, while the average mortgage balance surged by 150%, climbing from $172,000 in 2020 to $443,000 in 2024.
- Auto Loan Impact: These areas also experienced notable growth in auto loan originations and balances.
Financial Stability Concerns
Despite the economic opportunities crypto gains provide, the report raises red flags regarding financial stability:
- High Leverage: Households in high-crypto regions report mortgage debt-to-income ratios exceeding recommended thresholds.
- Potential Risks: Researchers warned that increased leverage could pose systemic risks, especially if tied to significant economic downturns or crypto market crashes.
However, delinquency rates in these areas remain low, suggesting limited immediate financial distress.
“Rising distress in this group could cause future financial stress, especially if exposure to high-leverage, high-risk consumers is concentrated in systemically important institutions,” the report concluded.
Broader Economic Context
The trend coincides with a broader increase in U.S. household debt, which reached a record $17.9 trillion in Q3 2024, driven by mortgages, auto loans, credit cards, and student loans, according to the Federal Reserve Bank of New York.
Financial Advisors Embrace Crypto
A separate survey by the Digital Assets Council of Financial Professionals (DACFP) and Franklin Templeton Digital Assets highlights growing confidence in cryptocurrencies among financial advisors:
- Client Adoption: 19% of advisors report that more than half their clients hold digital assets, up from 15% in Q2.
- Declining Skepticism: The percentage of advisors with no crypto-owning clients dropped to 3% in Q3, compared to 8% in Q2.
“These findings underscore a clear shift in how financial advisors view digital assets as part of their clients’ portfolios,” said Ric Edelman, founder of DACFP.
Conclusion
Crypto’s role in empowering lower-income households and reshaping financial strategies is undeniable. However, the associated risks underscore the need for careful monitoring and regulation.
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