Income volatility and residential mortgage delinquency across the EU

We investigate the socio-economic determinants of mortgage delinquency in eight EU mortgage markets and observe that income volatility exerts a positive effect on the mortgage delinquency risk. This pattern holds for borrowers with higher-income profiles if income volatility is high enough. From this result we can draw the following conclusions: (i) mortgage protection insurance policies might be failing to cover those borrowers most in need; (ii) there exist credit market imperfections and; (iii) a number of borrowers most at income risk may not be able to accumulate precautionary savings to meet mortgage payments when shocks in income arise.