1). Yes they do. Some even loan you 110% (Netherland..) of property value but mostly they loan you around 80%-90% of price. Usually bigger leverage means bigger interest.

2. Not really and honestly banks usually don't care if you pay in time.

3. Now I'm talking from experience as resident of some European country. When you are giving a loan to someone to purchase a property as a bank you are not loaning your own money. You loan this money usually from central bank and then "re-loan" it for higher interest to customer. Most of the mortgages in Europe are with fixed interest for some period therefore inflation doesn't really bothers you because bank loaned this money from central bank in times where you get the mortgage when interests were low.