Crypto adoption helps boost mortgage access for US low-income households

A new United States Treasury Department report has shown that lower-income households investing in crypto use their gains to take out mortgages.

Researchers at the Treasury’s Office of Financial Research, Samuel Hughes, Francisco Ilabaca, Jacob Lockwood, and Kevin Zhao, wrote the report titled Crypto Exposure and Household Financial Conditions.

According to the experts, proceeds from crypto sales have helped these households access larger mortgages and have increased the borrowing rate for areas with more crypto exposure. They observed that low-income households with access to mortgages have increased by 250% in these areas, and the average mortgage balance saw a 150% rise from $172,000 in 2020 to $443,000 in 2024.

The researchers said:

“The increase in borrowing is especially striking among low-income households in high crypto exposure areas. Zip codes with the highest crypto exposure saw the largest increase in mortgage and auto loan originations and balances over subsequent years.”

The report relied on tax data to identify areas with higher crypto exposure and classified any zip code with more than 6% of its households filing crypto-taxable events as an area with high crypto exposure. Interestingly, Zip codes that fall into this category increased from just 0.08% in 2020 to 6.3% in 2021.

Researchers identify risks of financial instability

Meanwhile, the report noted that low-income households with more exposure to crypto also have their mortgage debt-to-income ratio above the recommended level. The ratio in these areas is around 0.53 for low-income houses, far above the recommended benchmark of 0.36 and the conventional loan benchmark of 0.43. The researchers believe this is a significant risk as it could lead to financial instability for such households.

They stated:

“High crypto exposure may be associated with behavior that may contribute to financial instability.”

However, that fear appears unfounded, as most households in this category have not shown any sign of financial distress. Mortgage delinquency in these areas also remains relatively low, showing that the households’ financial position remains robust even with the high leverage.

Still, the experts believe there is still cause for concern for these households, especially when economic conditions worsen or the crypto market crashes. They noted that systemically important institutions exposed to high-leverage, high-risk consumers, such as crypto-exposed households, could cause future financial stress.

Thus, they recommended that there is a need to monitor the increased debt balances of low-income households that have exposure to crypto and how they increase their leverage. Mortgage debt is one of the major contributors to the US household debt, which reached $17.9 trillion in the third quarter of 2024.

Crypto exposure growing among US Households

While the report focused mostly on how low-income households, it also provided insight into the level of crypto exposure among US households across all income groups. Interestingly, most crypto exposure has come from urban areas and from high-income earners.

Between 2020 and 2021, the period mostly spotlighted in the report, the share of households in urban zip codes that reported crypto exposure went from 0.14% to 12.7%. However, it remained near zero for rural areas across the two years, with mostly low-income and middle-income earners having crypto exposure.

Meanwhile, high-income earners generally saw the biggest increase in crypto exposure, from 1.9% of households in 2020 to 6.4% in 2021. Thus, this proves that crypto exposure is predominant in “urban tech-centric cities.”

Previous data has shown that early crypto adoption was higher among highly educated individuals. The researchers’ analysis also shows that high crypto exposure in 2021 is linked with higher household income growth over 2020 – 2024.

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