How Crypto Is Changing the Mortgage Game for Low-Income Households?

US Treasury economists analyzed IRS data on households reporting cryptocurrency holdings on their annual tax returns and found that cryptocurrency ownership nearly tripled between 2020 and and 2021, the most recent year with tax data available.

The areas with the highest levels of crypto exposure in 2021 also saw significant increases in both mortgage loan origination and balance numbers in subsequent years.

Crypto earnings and bigger mortgages

The report revealed that for low-income households in areas with high crypto exposure, the mortgage rate increased from 4.1% in January 2020 to 15.4% in January 2024, nearly four times more The average mortgage balance rose more than 150%, from nearly $172,000 to just over $443,000, indicating that profits from cryptocurrency sales may have helped with larger down payments.

Low-income households in high-crypto areas earn an average of $40,664, which translates to a mortgage debt-to-income ratio of 0.53, well above the recommended 0.36 and the 0.43 required for some standard loans. The report suggests that this high ratio is concerning because it is linked to a higher risk of default, especially during financial crises.

On the other hand, in low-crypto areas, low-income households have a much lower debt-to-income ratio of 0.19, with an average mortgage balance of $136,481 and income of $35,950. This suggests that the rise in mortgage debt in recent years may be happening primarily in high-crypto areas, potentially adding to financial instability.

From 2020 to 2024, mortgage delinquency rates fell overall, especially among low-income households. The decrease in crime was similar in areas with high and low crypto exposure.

For example, crime fell by 4.2% in high-crypto areas and 3.8% in low-crypto areas for low-income groups. High crypto areas had lower delinquency rates in 2020, so the percentage drop was greater there. For high-income households, delinquency rates showed little change. As of Q1 2024, delinquency rates are the lowest in 15 years at around 1.7%, with no signs of “distress” in high-crypto areas.

Auto Loan Debt Hits $1.6 Billion, Crypto Areas See Biggest Increases

Auto loan debt has risen to more than $1.6 trillion by early 2024, with notable increases among low-income households, especially in areas of high crypto exposure. Between 2020 and 2024, average auto loan balances for low-income households grew by 52% in high-crypto areas, compared to a 38% increase in low-crypto areas . This could suggest that crypto revenues or windfalls may have enabled more vehicles to be purchased.

On the other hand, middle- and upper-income households saw declines in their average auto loan balances over the same period, though those in high-crypto areas saw smaller or even slight declines increases

Despite these changes in indebtedness, auto loan delinquency rates remained relatively stable for middle and upper income groups, indicating that the increase in auto debt has not yet translated into in widespread financial difficulty.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

LIMITED OFFER for CryptoPotato readers on Bybit – Use this link to register and open a FREE $500 position with any currency!