Mortgage loans come due in 2024
According to an article in the Financial Times, $117 billion in mortgage loans tied to commercial real estate will have to either be repaid or refinanced in 2024. Many of these loans were taken out when interest rates were low, but with rising rates and poorly performing real estate, significant losses could be incurred this year. Refinancing deals are expected to be difficult to arrange, and some borrowers are already considering handing back the keys to their lenders.
Small banks at risk
About two-thirds of the mortgages due this year are held by small and medium-sized banks that may struggle to stay afloat due to their exposure to commercial property mortgages. It remains to be seen if these failing banks will be acquired by larger banks deemed “too big to fail.”
Real estate’s fallibility
Real estate has long been seen as a fail-safe investment, but with the current situation, banks will face consequences for their previous profit gains. Individual investors and pension funds also have exposure to these troubled mortgages, highlighting the far-reaching impact of this debt crisis.
Haven assets: Gold and bitcoin
Amidst this debt crisis, gold and bitcoin continue to be assets that provide security. While gold is often manipulated in price, it remains a form of real money. Bitcoin, on the other hand, offers an alternative outside the traditional monetary system, although its future stability could be influenced if large institutional players enter the market. As the US and other major economies teeter on the brink of recession, investors will need to make informed decisions about where to hold their money.
Hot Take: The Looming Mortgage Crisis and the Role of Haven Assets
The looming mortgage crisis in 2024, which involves billions of dollars in commercial real estate loans, poses significant risks for banks and investors alike. Small and medium-sized banks face the most exposure, potentially impacting their ability to stay afloat. Real estate, once considered a reliable investment, now reveals its vulnerability. However, amid the uncertainty, haven assets like gold and bitcoin offer some security. As the world heads towards a possible recession, understanding the pros and cons of traditional banking versus investing in cryptocurrencies becomes crucial for safeguarding your wealth.
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