The brutal climb in Euribor and the drive of higher interest rates are starting to strain the euro. ECB officials focused on curbing inflation are impacting household finances as debt burdens rise for families buying homes. Mortgage volumes show a tendency toward rising delinquencies, with the Bank of Spain noting a month-to-month increase in people who have struggled to avoid missed payments. In the report released on Monday, the total euro amount of overdue mortgages climbed to 11.823 million, a rise from March and a clear signal of the deteriorating balance sheet for many homeowners. This marks the steepest quarterly increase since early 2014, when mortgage stress peaked during housing market turmoil. The current shift may also signal a potential turning point in the cycle, as rates and inflation bite deeper into household income and solvency.
Overall, the overweight of bad mortgage balances has trended downward since the first quarter of 2014, with only a few isolated increases in a handful of quarters since then. Those increases tended to be modest, after which delinquencies receded. Yet the latest data suggest a possible change in that pattern. The ECB has raised rates to their highest level since May 2001, Euribor sits at its loftiest level since 2008, and persistent inflation continues to squeeze family budgets. The resulting pressure threatens the ability of households to maintain timely mortgage payments and overall financial stability.
Past-due mortgages represent about 2.44 percent of the total mortgage book, higher than the 2.33 percent reported in the previous period but still well below the peak of 6.28 percent reached in March 2014. The Bank notes a steady expectation that the rate may continue to edge upward in the coming quarters, driven by both the higher outstanding mortgage stock and the ongoing contraction in new lending activity through advance repayments amid inflation shocks. Since mid-2022, the mortgage balance has fallen by roughly 13.29 billion euros, a decline of around 2.7 percent, totaling 483.224 million euros in the latest period.
Consumption and companies
Credit consumption and delays among households have also risen. In the second quarter, the unpaid balance reached about 4.148 million euros, marking a 2.11 percent increase and an 86 million euro rise in line with the prior January-March period. The total consumer loan portfolio grew by around 1.43 percent, but the rise in defaults outpaced that growth, lifting the defaults ratio by roughly 4.38 percent. On the business side, loans to companies show a contraction in both the overdue balance and the rate, with the overdue portion falling by 522 million euros and the rate slipping from 4.13 to 4.09 percent.
Default data by segment is published quarterly with a brief lag, but the overall default trend across the loan book appears to be moving with greater agility. Early signals hint at what may unfold in the third quarter. In July, the total doubtful loan balance declined by 399 million euros but rose by 0.94 percent to 41.774 billion euros. This suggests that the share of unpaid debts in total private-sector lending remained near a low not seen since December 2008. Bankers and auditors have warned for some time that the rapid rise in interest rates would eventually lift defaults, but they expect the increases to stay within temperate and manageable bounds for the industry.
Beyond lending, the Bank of Spain reported additional banking statistics. Depository institutions earned about 12.608 billion euros during the first half of the year, with a 3,848 million euro gain compared to the same period in 2022. This improvement reflects stronger net interest income as rates rose. Bank operations also show a broader footprint, with 52 more offices closing, bringing the total to 17,517 — a level not seen since the series began in 1981. The data paint a picture of a banking sector under pressure from higher rates, inflation and shifting consumer behavior, while remaining resilient enough to maintain a broad base of funding and capital.
Overall, the composition of private sector debt and the trajectory of household credit reveal a cautious but important evolution. The Bank of Spain continues to stress that while the path may be turbulent, the system shows signs of stabilization as lenders adjust to a higher-rate environment and households recalibrate their finances. Analysts attribute much of the current movement to the inflation shock, ongoing rate policy, and the lagged effects of balance sheet adjustments in mortgage portfolios. As the market absorbs these shifts, observers watch closely for further data releases to confirm whether this is a temporary pause or the beginning of a longer adjustment cycle. [Bank of Spain, 2024] [ECB communications, 2024] [Financial stability briefings, 2024]