Need to know
UK government borrowing costs have surged to their highest level in nearly 28 years, potentially pushing up mortgage rates and forcing cuts to public spending. Here’s what rising borrowing costs could mean for your finances and taxes
Uk borrowing rates hit 28-year high – need to know
- Britain’s government borrowing rates have soared to a near 28-year high amid global uncertainty and political chaos at home, with under-fire PM Sir Keir Starmer desperately trying to cling onto power.
- The 10-year bond rate hit 5.12% yesterday, the highest since the 2008 financial crash, while 30-year rates rocketed to 5.8% – a level not seen since May 1998.
- Investors are losing confidence in the UK’s ability to pay back loans due to rising inflation and uncertainty both at home and overseas. This means Britain has to pay higher interest rates on the bonds it sells to fund public services like schools, the military, and the NHS.
- An increase in government borrowing rates is “bad news for most Brits” as it means less money available for public spending. Starmer and Chancellor Rachel Reeves have committed to what they call “iron clad” rules on borrowing, meaning further cuts to public services could be on the cards.
- This could see councils getting even less funding for pothole repairs, while Education and NHS budgets face the axe. Many of the PM’s touted replacements like Andy Burnham and Angela Rayner would likely opt to increase taxes instead.
- Higher government borrowing rates typically lead to increases in mortgage rates and business loans, as investors view bond rates as a baseline for the whole UK economy. This could see rent prices rise as landlords offset costs onto tenants, while businesses may hike prices of goods and services.
- There is some good news for pension holders, as many funds invest in government bonds meaning they’ll be due higher yields.
- READ THE FULL STORY: What economic crisis means for you as government borrowing costs hit 28-year high
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