high loan - to - value ratios seems to have improved markedly over the past decade, and thus the movement of renters into homeownership is generally to be applauded, even if it causes our measures of debt service of homeowners to rise somewhat. another possible reason for rising credit card debt ratios is the use of credit cards for a variety of new purposes. the rise in credit card debt in the latter half of the 1990s is mirrored by a fall in unsecured personal loans. reflecting this general trend, the proportion of personal loans in credit union portfolios has been declining as well. the wider availability of credit cards and their ease of use have encouraged this substitution. the convenience of credit cards also has caused homeowners to shift the payment for a variety of expenditures to credit cards. in sum, credit card debt service ratios have risen to some extent because households prefer credit cards as a method of payment. * * * in contrast to the increase for homeowners, the rise in debt service ratios was steep for renters in the latter half of the 1990s. the rise for renters, as for homeowners, is concentrated in credit card lending and thus may reflect some of the same factors that have influenced homeowner debt service ratios. but unlike homeowners, renters in recent years have been using a higher fraction of their incomes for payments on student loans and used - car debt. renters tend to be younger and have lower incomes than homeowners, so the fact that student loans and used - car payments are a larger share of their income is not surprising, although this trend might be worrisome if it indicates greater difficulties in becoming financially established. in addition, some of the rise in the debt service ratios of renters, unlike that of homeowners, occurred during the most recent recession, a difference highlighting the fact that incomes of renters are generally more at risk during economic downturns. renters ’ debt service ratios have stabilized during the past two years, a hopeful sign that is likely correlated with the overall improvement in the economy. however, the rise in the renter debt service ratio might indicate some trends among these households that may be of concern and that need to be investigated further. mitigating homeowner payment shocks rising debt service ratios are a concern if they reflect household financial stress and presage a drop in consumption or a rise in losses by lenders. most homeowners and renters are aware of

commission's uncertainty index has reached its highest level to date. furthermore, with formal budget submissions from several euro area countries still pending, projecting the future fiscal policy stance is challenging. this environment of very high uncertainty could dent confidence and dampen the recovery in consumption and investment. such pessimism is visible, for instance, in consumer expectations. while real household income increased both in 2023 and 2024 according to national accounts, only little more than a third of respondents to our latest consumer expectations survey see their real income as having increased or at least stayed the same. whereas only about 10 % of households indicate an increase in perceived real income, in reality more than half of the households surveyed experienced an increase in their real income, when inflation is netted out from their selfreported nominal income. 2 financial stability in this volatile economic environment, we see elevated financial stability vulnerabilities. 2 / 4 bis - central bankers'speeches high valuations and concentrated risks leave financial markets vulnerable to adverse dynamics, which could be exacerbated by non - banks. non - bank financial intermediaries have remained resilient to recent bouts of market volatility, supporting market - based finance in the euro area. however, broader market shocks could trigger sudden investment fund outflows or margin calls on derivative exposures. given relatively low liquid asset holdings and significant liquidity mismatches in some open - ended investment funds, cash shortages could result in forced asset sales amplifying the fall in asset prices. while generally limited, pockets of elevated financial and synthetic leverage in some entities, like hedge funds, may add to spillover risks. simultaneously, sovereign vulnerabilities are increasing. despite recent reductions in debt - to - gdp ratios in some euro area countries, fiscal challenges persist in several others. they are exacerbated by heightened policy and geopolitical uncertainty and structural issues such as sluggish potential growth. we therefore need to keep monitoring risks to financial stability carefully, including those stemming from recent increases in sovereign yields in the united states, the united kingdom and, though more moderate, in the euro area. on a more positive note, euro area banks are strong. their resilience has been underpinned by solid capital ratios, robust liquidity buffers and high bank profitability. the latter may have reached its peak, however, as net interest margins are already declining while credit losses are gradually rising. in this uncertain macro - financial environment, preserving bank