Australia’s housing prices are still outpacing income, prompting businesses to introduce Bitcoin-backed mortgages. This provides cryptocurrency holders with a unique avenue to invest in real estate without needing to liquidate their assets.
On Wednesday, Block Harner rolled out Australia’s first Bitcoin-assisted mortgage after a lengthy battle with regulators that lasted more than two years. This breakthrough followed a federal court decision in April, which determined that block-earner crypto loan products are not classified as “financial products” under the Corporate Act.
This ruling exempted the company from needing a financial services license to offer Bitcoin as collateral for its mortgage.
With this new option, borrowers’ collateral tokens are safeguarded by the fire block of the custody platform. Bitcoin is used to secure cash loans that can cover up to 50% of the asset’s value, while standard mortgages can supplement these funds.
Not only does this model create fresh opportunities for Bitcoin holders, but it also introduces an alternative method for assessing creditworthiness, deviating from the usual focus on aspects like salary, cash reserves, and retirement funds—like Australia’s mandatory retirement program.
Developments in US Bitcoin-assisted loans
Australia isn’t the only nation exploring Bitcoin and crypto-assisted mortgages. In the US, agencies are also investigating how to incorporate cryptocurrency into mortgage loans.
On June 25, William Plute, the director of the Federal Housing and Finance Agency (FHFA), instructed Fannie Mae and Freddie Mac to study how the crypto assets of regulated exchanges could be counted as reserves for mortgage assessments.
He urged these government-sponsored enterprises to consider cryptocurrency when evaluating mortgage risk.
Recently, a new bill (HR4374) was introduced in Congress that would mandate lenders to recognize cryptocurrency holdings when assessing mortgage creditworthiness. If this legislation is approved, lenders would have to factor in funds held on crypto platforms without requiring conversion to fiat currency, thereby broadening access to mortgages for digital asset owners.
Housing crises in Australia and the US
Both Australia and the US are grappling with housing crises, marking significant developments in crypto-assisted housing loans.
Australia has gained notoriety for having one of the least affordable housing markets globally. On average, home prices in the country are nearly ten times the typical household income. In Sydney, the situation is even more extreme, with median home prices reaching nearly 14 times the area’s median income, trailing only Hong Kong.
Meanwhile, in the US, median home prices are projected to exceed $420,000 for 2024-2025, roughly seven times the median household income. This escalating situation has led to a concerning rise in homelessness, with more than 653,000 people recorded in January 2023—marking the highest number tracked since 2007.
As home prices continue to surge, homeownership becomes increasingly unattainable for many in both countries. Yet, there’s a notable rise in cryptocurrency, with values climbing nearly 87% in the past year, offering a contrasting scenario to the housing market.
