💰How Does Cryptocurrency Affect the Mortgage Landscape for Low-Income Families in the United States?
According to a research report by economists at the U.S. Department of the Treasury, the number of households holding cryptocurrency nearly tripled from 2020 to 2021. Moreover, in regions with the highest cryptocurrency holdings, there was also a significant increase in the issuance and balance of mortgages and auto loans.
Research shows that for those low-income households that are more active in cryptocurrency investment, their mortgage interest rates soared from 4.1% in January 2020 to 15.4% in January 2024, nearly quadrupling! The average mortgage balance also increased from $172,000 to over $443,000. This may indicate that the profits they obtained from selling cryptocurrency could help them afford higher down payments.
However, it is important to be cautious as these households' mortgage debt-to-income ratio is as high as 0.53, far exceeding the recommended 0.36 and the lending standard of 0.43. Meanwhile, auto loan debt has also surpassed $1.6 trillion, particularly in areas with high cryptocurrency usage, where low-income households' auto loan debt has significantly increased. This high ratio may indicate a greater risk of default, especially during economic crises.
From 2020 to 2024, cryptocurrency contributed to a 52% increase in the average auto loan balance for low-income households, while regions with low cryptocurrency usage saw only a 38% increase. This may suggest that cryptocurrency income or windfalls could encourage people to purchase more cars.
Fortunately, as of the first quarter of 2024, the loan delinquency rate is at its lowest level in 15 years, around 1.7%; while in areas with high cryptocurrency usage, there seems to be no signs of "distress."
In summary, while delinquency rates for mortgages and auto loans have declined overall in 2024, in the context of global consumption downgrade, this trend may not only weaken domestic economic vitality in the United States but could also trigger a chain reaction in the global economy, thereby exacerbating the instability of the financial system.
Therefore, when it comes to cryptocurrency investment, we should remain cautious and not let short-term profits cloud our judgment. Remember to invest rationally to guard against uncontrollable economic risks.