Summary of the Bank of England Financial Stability Report – July 2025

The Bank of England publishes a Financial Stability Report twice a year. It’s like a health check-up for the UK’s whole money system – banks, lenders, investors, and markets. The goal is to spot any big dangers early so the system stays strong enough to help ordinary people and businesses borrow, save, and pay bills even if things get tough. This matters to everyday people because a stable financial system means loans for homes or cars remain available, savings are protected, and the economy doesn't crash in a way that leads to job losses or higher costs.

The July 2025 report says: The UK money system is in good shape overall and can handle problems, but there are still some worries, especially from things happening around the world and in parts of the finance world that aren’t traditional banks.

1. The UK’s banks have plenty of spare money (called “capital”) put aside for bad times. They are strong enough to keep lending to families and companies even if the economy gets much worse than expected.
2. Proof: Banks passed tough “stress tests” (imaginary bad scenarios) and still had capital well above the minimum needed.
3. Ordinary people and businesses are mostly coping with higher interest rates. Very few are falling behind on loans.
4. Company bankruptcies are low: only about 50 insolvencies for every 10,000 businesses in the year to May 2025 (much lower than in past crises).
5. Household debt payments as a share of income are manageable and expected to stay below past danger levels even in a severe shock (Bank staff calculations, Chart 3.1 in the report).

Higher mortgage rates have made monthly payments bigger, especially for people on lower incomes or who rent.

But things are starting to get a bit easier: wages are rising faster than before, and rent increases slowed down in the second half of 2024. This is evidenced by Bank survey (NMG survey, Q1 2025) showing more renters were able to put money into savings again. Overall, families added to their savings pots in early 2025, making them tougher against future shocks.

Mortgage lending is still careful. There’s a rule to stop too many risky big loans: no more than 15% of new mortgages can go to people borrowing 4.5 times (or more) their income. In the first three months of 2025 this went up slightly to 9.7% (still safely below the 15% limit). The Bank relaxed the rule a tiny bit so individual lenders have more flexibility, but the total stays safe.