Recent research from the European Central Bank (ECB) has shed light on a concerning trend among low-income households across Europe, indicating a growing expectation of late payments on mortgages and key bills in the coming months. The findings underscore the challenges faced by many individuals as a result of rising interest rates, rents, and utility costs.
The ECB’s economic bulletin article highlights the significance of households’ ability to meet housing-related costs, particularly for lower-income groups. Since the ECB began raising interest rates in July 2022, housing costs have surged, with outright owners experiencing a 6% increase, while mortgagees and renters have seen even steeper hikes at 12% and 9%, respectively.
In January 2024, households were spending an average of €765 per month on total housing-related expenses, including utilities, maintenance, rent, or mortgage payments. For renters, these costs consume around 40% of their income, compared to 35% for mortgage holders and 20% for outright owners. However, low-income renters often find themselves allocating nearly half of their monthly wages towards housing expenses.
Of the three categories, mortgage holders face the most significant challenges, with average monthly payments exceeding €1,100 due to increased interest rates. Moreover, rising borrowing costs have also impacted the rental market, leading to price hikes and a shortage of available dwellings.
Among the 11 countries examined, Ireland emerges with the highest housing costs, followed by Germany and Austria. Austria stands out as the most expensive country when housing costs are considered as a ratio of household income, with approximately 29% (or 33% with mortgages included) allocated towards such expenses.
The report highlights a concerning trend among low-income households, with a substantial increase in the proportion expecting late payments in the next three months, particularly for utilities, rent, and mortgages. While inflation in the Eurozone is showing signs of decline, expectations are high for the ECB to begin cutting historically high interest rates in June, potentially alleviating some pressure on the property market and offering relief to struggling households.
