UK Borrowing Costs Hit 27-Year High, Fueling Budget Worries

Britain's long-term borrowing costs have surged to their highest level since 1998. The yield on the 30-year gilt rose above 6 per cent, reaching a peak of 6.029 per cent on October 1, according to LSEG data cited by Reuters. This marks the first time a G7 economy has seen a 30-year yield at this level since the eurozone crisis.

The benchmark 10-year yield rose eight basis points to 5.510 per cent, its highest since July 2007, while five-year yields reached their highest since July 2008.

Analysts attribute the rise in borrowing costs to central bank rate hikes and a global sell-off in government bonds. The UK's reliance on natural gas for heating and power generation has also contributed to the higher yields.

The Bank of England is expected to raise interest rates, with markets pricing in increases for November or December, and possibly February. Consumer price inflation stood at 3.1 per cent in August, while debt-interest spending had more than doubled as a share of GDP since just before the pandemic.