UK Pays 5.38% to Borrow for 10 Years, Highest Rate Since 1999

Britain's Debt Management Office said Tuesday the government borrowed £4.25 billion for 10 years at a 5.38% interest rate, the highest borrowing cost since 1999, as inflation fears and a near-£3 trillion debt pile pressure public finances. Chancellor John Healey faces a Budget on Oct. 28 with limited fiscal room. Citi economist Jamie Searle estimated higher borrowing costs alone wiped about £8.2 billion from the roughly £24 billion of headroom left by predecessor Rachel Reeves. UK debt equals 94% of GDP, below France's 119%, but the UK 10-year yield of 5.37% exceeds France's 4.78% and the US 5.24% on 10-year Treasuries. Rising global borrowing costs have filtered into mortgages, with new home loans averaging 4.6% last month, the highest in nearly two years, and approvals falling below 55,000.