A recent report by U.S. Treasury economists reveals that low-income households with significant cryptocurrency exposure are seeing substantial increases in mortgage and auto loan originations and balances.
The report suggests that profits from crypto investments are helping these households obtain larger loans, especially for purchasing homes.
“Zip codes with the highest crypto exposure saw the largest increase in mortgage and auto loan originations and balances over subsequent years,” the report stated.
The report found that the percentage of low-income households with mortgages in areas with high cryptocurrency activity increased by more than 250%. The average mortgage balance rose from $172,000 in 2020 to $443,000 in 2024, marking a significant increase of 150%. These trends were identified using tax data to classify zip codes with high cryptocurrency exposure, defined as areas where over 6% of households reported crypto-related tax events.
The study raises concerns about low-income households with high mortgage debt-to-income ratios, indicating a risk of financial instability. While delinquency rates are currently low, the researchers warn that increasing debt and leverage could pose future risks, especially in a worsening economic climate. They note that high exposure to cryptocurrency might lead to behaviours that contribute to financial instability. Financial distress among these vulnerable households could affect significant institutions and have broader economic implications. The researchers stress the need for close monitoring of rising debt and leverage among these groups to prevent substantial financial stress.
Notably, Awareness of cryptocurrency in the UK has increased from 91% to 93%, according to the Financial Conduct Authority (FCA). The average value of crypto holdings rose from £1,595 to £1,842. The report indicates that personal networks, mainly family and friends, are vital sources of information for those who haven’t purchased crypto. Only 10% of respondents bought cryptocurrency without prior research, reflecting a cautious investment approach.
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