As a major US lender weighs up the feasibility of accepting bitcoin to satisfy mortgage payments, experts have questioned whether UK lenders should follow suit.
This week, United Wholesale Mortgage announced it would become America’s first mortgage lender to accept cryptocurrency for home loans before the end of this year.
In the UK, no major mortgage lender has yet announced such plans. But could this change?
“It is inevitable that bitcoin will have to be considered,” Adam Pigott, chief executive officer at property portal OpenBrix, told FTAdviser.
“The youngsters these days are not opening high street bank accounts and not investing in stocks and shares. They want easy access to crypto and they also want to be able to open a bank account digitally which they can do with ease."
He warned: "The longer traditional banks push back on crypto the more they damage their future. Whether any of us like bitcoin or not, its march will continue.”
More than half of young UK investors are now trading cryptocurrencies, according to data published by Charles Schwab UK in April. And a further 70 per cent view the digital asset as a ‘good investment’.
Interest from young investors in bitcoin has prompted the Financial Conduct Authority to create a campaign warning of the risks in cryptocurrency investing. The FCA said in June it will spend £11m on it.
Dharmesh Mistry, chief executive officer at AskHomey, a residents’ handover platform for developers, said regulators would have to ensure exchanges followed Know Your Customer rules if mortgage lenders in the UK began to accept bitcoin as a form of payment.
This would require withdrawals over £10,000 to be reported to HMRC.
“That should be enough,” said Mistry. “The issue that remains is there is nothing to stop me withdrawing coins and using them elsewhere in the world without paying tax on any gains from those coins. The problem exists with cash. But withdrawing cash gets reported and KYC'd.”
As a recent case shows crypto firms can be tricky to regulate. This week the FCA effectively removed a firm's permissions after it deemed it "not capable of being effectively supervised".
This was after Binance Markets Limited, which is part of the world’s largest crypto exchange company, failed to engage with the regulator.
Chris Sykes, associate director and mortgage consultant at Private Finance, doubts UK lenders will accept bitcoin any time soon.
“From looking at US clients' bank statements, often US mortgages work very differently to UK ones. Where UK mortgages are paid 99/100 by direct debit to the lender, in the US it seems that applicants physically send the money to their mortgage lender on a monthly basis.”
In some cases, Sykes has seen this done by cheque in the US. “In the UK, there are still only a few lenders that will allow you to use crypto as a source of deposit, let alone service the debt in crypto. So I don’t see mortgage lenders accepting it any time soon.”
Martin Stewart, co-founder and director of mortgage broker network The Money Group, cited recent developments in OnlyFans’ policy as a case in point when considering whether lenders would accept bitcoin for mortgage payments.
The UK firm banned pornography on its platform after both US and UK banks refused to facilitate bank accounts held by sex workers.
Stewart said: “It has seen banks draw a morally firm line in the sand regarding the provision of banking facilities.
“Given bitcoin has already got a reputation for supporting some criminal activity, it falls on the banks to decide whether their appetite for reputational risk is greater than their appetite for lending."
He said the market would need to be satisfied with money laundering and taxation before banks would feel comfortable taking crypto currency as a deposit.
“That’s not to say it won’t or can’t happen, but I don’t think it is a big enough part of the market at the moment to warrant huge investment from the lenders.”
On the savings side Mistry said accepting bitcoin could present some considerable benefits to UK lenders. One being the potential uptick in younger investors getting on the property ladder.
“Think about how long it takes to save for a deposit with the paltry interest you get from banks,” said Mistry, “Plus if you get on the right side of the curve, you might get [double digit] per cent growth, allowing you to buy sooner.”
Although he added: “It is a higher risk if you need the money in an emergency and the market is down.”
This is why Mistry concluded bitcoin should still only make up 5-10 per cent of people’s savings. “The same goes for investing in the stock market. It shouldn't be your only investment.”
He added: “My kids don't save, because they feel buying a house is too far off. They are right, especially after the price rises we have seen this past year.”
ruby.hinchliffe@ft.com
