UK Borrowing Costs Soar to 29-Year High Amid Energy Price Hikes

UK government borrowing costs have risen to their highest level since 1998, adding to economic pressure on households and businesses. The cost of long-term Government borrowing climbed above 6 per cent for the first time in almost 29 years. This increase is partly due to growing concerns about inflation, higher energy prices, and the prospect of further interest rate rises.

The average five-year fixed mortgage rate has reached 5.95 per cent, its highest since October 2023, while the average two-year fixed residential mortgage rate has climbed to 5.94 per cent, its highest since July 2024. Financial markets are increasingly expecting the Bank of England to raise interest rates again as higher energy prices threaten to push inflation upwards.

The renewed increase in mortgage costs will be particularly concerning for homeowners approaching the end of fixed-rate deals, as well as first-time buyers already struggling with affordability. Businesses are facing their own difficulties, with higher borrowing and energy costs adding to concerns about taxation and the economic outlook.