Crypto enquiries cause headaches for brokers

Crypto enquiries cause headaches for brokers

A growing number of borrowers are inquiring how they can use cryptocurrency gains to secure a mortgage deposit, but with lenders unconvinced, brokers are facing a series of headaches on the issue.

Nationwide was the only high street lender to have accepted cryptocurrency, doing so on a case-by-case basis until earlier this year. It has told FTAdviser it now no longer does so, amid a wider review of the bank’s interaction with the digital asset.

With only a handful of specialist lenders now accepting cryptocurrency as a means of funding a mortgage deposit, brokers are finding it difficult to deal with the increasing number of applications or enquiries on the subject. 

Some do not even try, for fear of lenders striking them off lending panels if an application is found to be backed by funds which don’t pass anti-money laundering checks.

“[Cryptocurrency] is featuring increasingly regularly in new purchase enquiries of late. Not to fund the whole deposit for the most part, but a part of it, in the same way as borrowers may sell stocks and investments," said Chris Sykes, associate director and mortgage consultant at brokerage Private Finance.

“Times have changed considerably and cryptocurrency is very much part of the mainstream especially with younger borrowers,” he added.

In June the Financial Conduct Authority estimated 2.3m adults held cryptoassets - up from 1.9m last year.

Sykes said those with crypto-derived deposits might be forced to seek out specialist lenders who often charge higher rates.

At least one mainstream lender, Coventry Building Society, does currently accept cryptocurrency gains as part of a mortgage deposit. Others, such as Santander, have accepted crypto-funded deposits on a case-by-case basis in the past, but brokers are yet to see much success on the whole.

Aaron Strutt, product and communications director at brokerage Trinity Financial, said he was aware of “lots of people” who were “very frustrated” due to the fact they earn a lot from cryptocurrency investments, but when they came to buy a property, they couldn't find lenders which accepted their profits.

“And even if they do, it’s massively on a case-by-case basis,” Strutt explained. “I’m not sure how many mortgages we’ve actually got through on this basis.”

He continued: “We’ve had this conversation for so many years, and it doesn’t seem like lenders have come out with a set policy.

“There’s definitely demand. It’s just tricky and there is no guarantee the deal will go through. We often see buyers finding another way around it, such as borrowing from mum and dad.”

This would see the first-time buyers’ parents take on the cryptocurrency gains, and gift back an equivalent amount from a non-crypto source.

AML checks

Nationwide told FTAdviser it changed its position on cryptocurrency in the summer on the basis of the digital asset's “growing prominence”. 

The building society said the spike in popularity posed an “increasing challenge” to assessing and verifying the source of a crypto-funded deposit, a process Nationwide must complete in line with anti-money laundering regulations.