Broker points out risks in using crypto as loan collateral
Australians now have the option to use Bitcoin as collateral for home loans, following the launch of the country’s first Bitcoin-backed mortgage product. However, industry professionals are advising potential borrowers to carefully consider the risks before proceeding.
Chris Dodson (pictured), director and principal at Mortgages Plus, said that while cryptocurrencies are gaining recognition as an asset class, their volatility remains a significant concern.
“I like the idea of people thinking of innovation and reassessing digital currencies as an asset class,” he said. “But the volatility is a concern, as it wasn’t too long ago Bitcoin fell below US$100 and two weeks later it’s up to US$120,000, so that was a pretty wild swing.
“I welcome the innovation and recognise the asset class is maturing but also we need to make sure our clients are looked after.”
The new product is being introduced by Block Earner, which recently won a court case against the Australian Securities and Investments Commission (ASIC), allowing it to offer Bitcoin-backed loans without a financial services licence.
Block Earner stated it intends to work closely with regulators to ensure consumer benefits and compliance. “Block Earner continues to operate business-as-usual and remains fully committed to compliance, innovation, and building products that benefit Australian consumers,” the company said.
Interest rates for the Bitcoin-backed loans start at 9.50% per annum with a 40% loan-to-value ratio (LVR), and comparison rates reach 11.93% per annum for an 80% LVR. Fixed rates are set at 11.50% per annum for 12 months with a 50% LVR, and the comparison fixed rate is 12.17% with an 80% LVR.
Borrowers are able to retain ownership of their Bitcoin, meaning they could benefit if the cryptocurrency’s value rises, but they also risk owing more if the value drops. Block Earner noted that traditional affordability measures based on wage growth and the Australian dollar point to a worsening housing crisis, but argued that pricing homes in assets like Bitcoin could alter the picture for long-term holders.
Charlie Karaboga, chief executive and co-founder at Block Earner, described the launch as a milestone for both property finance and digital assets. “Crypto holders shouldn’t have to choose between holding Bitcoin and buying a home,” he said. “We’re giving them a smarter option, a way to put their crypto to work without giving it up. This product isn’t just innovative, it’s inevitable.”
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