According to a report from the Wall Street Journal, banks are set to reorganize how they issue mortgage loans. This is because Libor rates are on a decline as banks are lending to each other on lower costs. This means that inter-bank confidence and trust and also there is an overflow of funds which makes more of these institutions open to lending to each other. The effect is that the cost of these home loans will reduce and mortgagees will, therefore, have high disposable incomes. The implication is that these people would tend to invest in Crypto markets and their participation could trigger the next bull run.
Libor Rates Have Been On A Steady Decline
Interbank rates have been declining partly due to internal reorganization of banks following the 2008/09 crisis. Additionally, the feds have been subjecting banks to stringent rules to ensure compliance. Further, the US economy has been on an upswing particularly with the election of President Trump. He authorized a reduction of taxes and other regulatory bottlenecks that impede enterprise development that has strengthened the banking sector in the US and abroad.
For this reason, banks have the capacity to issue lower mortgage rates that have hit historical lows especially for new mortgage applications from 2018.
Relationship Between Mortgage Rates And Investments Markets
The fixed cost of a mortgage is basically money that is not liquid. Therefore, when the costs decrease especially for qualified buyers, the beneficiaries end up having higher disposable income. The fact that mortgages usually take a significant portion of income means that relief has a significant effect on the investment patterns of the loan recipient and many people could seek to diversify their investments portfolios.
On the industry level, there is no direct relationship between mortgages and Crypto markets. However, the indirect relationship that exists can impact the Digital Tokens markets especially since it is very small at less than $200 billion dollars. Hence, any factor that may trigger increased market activity from an established product such as the mortgage market can greatly spur growth.
Mortgage Securities Versus Crypto Markets Performance
On the macro level, lower mortgage rates mean more capital for Crypto markets investments. However, Crypto markets have been on a downward spiral in much of 2018 and more significantly from November 24th, 2018 after the Bitcoin Cash wars. Prices have never recovered.
On the other hand, mortgage securities have been recording marginal but steady gains in the same period. This means that mortgage securities had higher returns than Cryptos. This gives the impression that many investors could be selling off their Digital Assets for mortgage securities.
However, from a broader market perspective, mortgage markets are susceptible to government policies and loan performance. The risks pertaining to these factors can cripple the market and erode all gains.
Meanwhile, Crypto markets on the broader sense, are decentralized and more volatile meaning that they have a chance of breaking out and yielding high returns on investments. This makes Cryptos like BTC, ETH, XRP, BCH, etc. to be more attractive to beneficiaries of low mortgage rates.