Fears of Interest Rate Increase
Fears are growing that interest rates in the UK could reach six per cent as government bond yields have risen to levels not seen since the 2008 financial crisis. The yield on ten-year government bonds, known as gilts, has reached 4.75 per cent.
Government Bonds Reach Highest Level Since 2008 Crisis
The rise in gilt yields surpasses levels seen after Kwasi Kwarteng's disastrous mini-budget. These high levels have not been witnessed since the global financial crisis of 2008.
Impact on Borrowers and Mortgages
Gilts are closely monitored as they are the best indicators of market expectations for interest rates. High street lenders use gilt yields to determine pricing for mortgages and other borrowing. The rise in yields has sparked concern among traders that the Bank of England may have to continue raising rates, potentially reaching as high as six per cent.
Analyst Predicts Further Rate Increase
Market analyst, Simon French, predicts an 85 per cent chance that the Bank of England will raise rates by 0.25 per cent to 5.5 per cent next month. This would mark the 15th consecutive rate increase, leading to more financial strain for mortgage holders.
Economic Data Supports Rate Hike
Recent wage figures and inflation data have reinforced economists' belief that further rate hikes are necessary to combat inflation. This has led to speculation about how long interest rates will remain at these elevated levels.
"It’s now less about how many more rate hikes are coming, more about how long we could see rates staying at these sorts of levels," says analyst Michael Hewson.
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