Despite the sharp rise in Euribor driven by higher official rates from the European Central Bank to curb inflation, mortgage payments have stayed controllable. The situation remains sensitive as households rely on savings and social benefits to cover housing costs, and many households have avoided stopping contributions even amid recent years of income pressure and job losses. The latest figures show that defaults are still far from their historical peak, with mortgage loan balances showing a small uptick from 2.33% to 2.44% by June, even as the overall rate sits above 6.28% in March. The data also reveal a clear income-related split: lower-income households experience higher default rates compared with wealthier families, a pattern that underscores how income level shapes mortgage risk.
Bank of Spain data indicate that around 20% of households with annual gross income under 26,695 euros saw a decline in mortgage defaults, from 3.69% in December 2021 to 3.27% by last June. Yet the rate remains double that of the wealthiest 20% of households, whose income exceeds 40,775 euros per year and where defaults moved from 1.99% to 1.63% in the period. These figures confirm the intuitive idea that lower income bands strain mortgage payments more, with late payments observed across income brackets: 3.12% for households earning 26,695 to 30,735 euros, 2.86% for 30,735 to 34,728 euros, and 2.44% for 34,728 to 40,775 euros.
Across all family groups, wage growth has lagged behind rising mortgage costs. Since the end of 2021, average monthly mortgage payments rose between 19% and 21%, translating to increases of 453 to 542 euros for the lowest income groups and 716 to 869 euros for the highest. The impact on finances has been unequal. Mortgage payments absorbed 23.22% of gross income for the lowest-income families in December 2021, rising to 26.23% by June, while the wealthiest families saw an increase from 17.14% to 19.66%. The pattern is clear: higher-income households retain more margin to cover other expenses after mortgage obligations.
Vulnerability indicators
Mortgage costs weigh on all household groups, with a commonly used threshold around 30% of income considered cautious. The Bank of Spain notes that this metric did not reveal broad alarm signs across the board. Still, the average implies that some families carry mortgage payments above that threshold. For low-income households, those closest to the barrier (around 26.23% of income) are the most exposed to a potential rise in vulnerability, signaling a growing share of families at greater risk of financial stress and default.
Another related indicator shows that about 40% of low-income households carry a balance equivalent to roughly 11% of total mortgage lending due to limited access to loans. Lower savings, a smaller down payment capability, and lower property prices still restrict affordability. The overall weight of mortgage debt in this group is about 11,000 million euros, a figure that reflects higher-than-expected risk given the size of this lending pool.
Increase in defaults
Older financial weaknesses continue to place low-income households in a more vulnerable position, with expectations of some deterioration in credit quality. The latest financial stability report highlights a positive trend in the labor market and overall economic activity, even as inflation moderation and income recovery contribute to a modest improvement. This context helps explain why delinquencies have continued to ease while the overall mortgage balance has risen since late 2021, moving to 3.5% by September and signaling ongoing transmission of higher rates to household debt.
The agency estimates that roughly one in three mortgages with variable interest face a rate review, with potential adjustments of more than a percentage point by mid-2023 and mid-2024. A further scenario, a five percentage point increase in Euribor fully passed to loans, could raise the number of indebted households and push those paying more than 40% of income into a more precarious situation. That group represents about 14.6% of total households, or around 1.63 million families, underscoring how rising rates can widen financial vulnerability even as overall delinquencies trend downward.