The US real estate market, which enjoyed a stellar performance in 2021, has been hit by crypto-backed mortgages.
The growing level of crypto adoption across the globe has resulted in a sharp rise in digital asset banks and mortgage lenders. One of the active points is the City of Miami, with its mayor, Francis Suarez, and Ron DeSantis, Florida’s State governor, acting as top crypto advocates.
Now that the City of Miami is looking forward to becoming the center of the best cryptocurrency hub, an alarm has already been raised by Weiss Ratings.
Weiss Ratings Issues a Warning on Crypto-backed Mortgages
According to the Weiss Ratings released on Tuesday, there are major concerns about crypto-backed mortgages. Particularly, the report shows that a Miami startup is racing to secure home loans with cryptos.
Milo, a Florida-based digital bank, has said it is accepting Bitcoins as security for home loans. The bank further indicates that it is planning to expand this portfolio by offering mortgage-backed securities to insurance firms and asset managers.
In the last week of April 2022, the US mortgage rate was 5.10%, which reflects a huge rise of 212 basis points when compared to the same period in 2021. The price of houses has also shot up, and mortgage rates are also on an uptrend because of two prime things:
- Response to inflation.
- Emerging sentiments about the US Fed monetary policy.
As the prices of property and rates of US mortgages move up, the reverse is true for Bitcoin and the entire crypto market. Now that the crypto market and stocks are showing a clear correlation, a monetary policy for normalization could be on the way.
According to the Weiss Report, there is a waitlist of about 8,000 homebuyers in New York, California, and Texas. However, this growing demand is not surprising, factoring in that buyers can borrow up to 100% of the buying price. The mortgage rates are also very low, 3.95%. Therefore, homebuyers need not sell their Ethereum (ETH) or Bitcoin (BTC) because there are firms that are ready to accept the coins as collateral.
Miami Planning to Become a Crypto Hub
It is not just Milo that is into cryptos. XBTO, a digital assets investment firm, was reported to be working on finishing a multi-million dollar collateralized mortgage in Miami. The growing activities in the crypto space indicate that Miami is rapidly transforming into an important crypto hub.
In January 2020, Mayor Suarez indicated that he was going to take his first three paychecks in Bitcoin (BTC). Earlier on in July 2021, the City of Miami launched MiamiCoin (MIA), which made one of the first CityCoins to market.
Now that the crypto-backed mortgages have taken an uptrend, it remains to be seen how the SEC and US lawmakers will respond. Bitcoin price dropped to sub USD 30,000, and the surging demand for crypto-backed mortgages could be the first major test.