Why are bond yields rising and how does it affect me?

Published On Jan 9, 2025, 7:55 AM

UK borrowing costs are rising significantly due to increased yields on government bonds (gilts), which have reached their highest levels in years. This increase is a result of multiple factors, including economic uncertainty and rising inflation, which is currently at 2.6%. The government may have to cut spending or raise taxes to manage these higher borrowing costs, leading to potential negative impacts on public services. The rising yields also affect the mortgage market, where lenders are cautious in adjusting rates amidst this economic uncertainty, although those looking to buy annuities may find favorable conditions. The Treasury is awaiting an official borrowing forecast due on March 26, which could influence market stability depending on its contents.