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Wed, 02 Sep 2026

Wed, 02 Sep 2026 Why are UK borrowing costs rising and what does it mean for me?

Some government borrowing costs have hit their highest level for 28 years - what does it mean for you?
UK government borrowing costs have reached their highest level since 1998, as investors worldwide worry about inflation. This rise is due to the increasing demand for higher interest rates on government bonds, known as "gilts". Gilt yields have gone up, with the 10-year bond yield at its highest since 2008 and the 30-year bond yield at its highest since 1998. As a result, it will cost the UK government more to borrow money over the long term. This development comes at a critical time for new Prime Minister Andy Burnham and Chancellor John Healey, who are preparing their first budget on October 28th. The government's ability to manage public finances is limited by its own fiscal rules, which may force it to reduce spending or implement tax rises. This could lead to reduced support for households struggling with the cost of living. Higher gilt yields may also impact the mortgage market, particularly if lenders increase their funding costs. However, this effect is expected to be different from the rapid rise in mortgage rates seen after Liz Truss's mini-Budget in 2022. The increased demand for higher interest rates on government bonds is not limited to the UK and has been observed in other countries such as the US, Japan, and Europe. Investors are concerned about high oil prices and inflation, which have led them to demand higher yields on bonds as compensation. This trend may be driven by factors such as the ongoing conflict in the Middle East and increasing borrowing costs globally.