What Rising Government Borrowing Costs Mean for Your Mortgage

If you are buying or remortgaging in Euxton, Chorley, or nearby Lancashire towns, take note of this week's news. Government borrowing costs have just hit their highest levels in decades, directly affecting mortgage rates. ¹

Two figures from this week's bond markets explain why:

• The yield on a 10-year gilt, the interest the government pays to borrow over that period, rose to 5.22%, its highest since June 2008 at the height of the global financial crisis.¹
• The yield on a 30-year gilt climbed even further, to 5.89%, its highest level since 1998.¹

Lenders use these gilt yields to help price the fixed-rate mortgage deals they offer. When it becomes more expensive for the government to borrow, it often becomes more expensive for banks and building societies too, and that cost can be passed on through higher mortgage rates.¹

A few separate things are pushing yields higher:

1. Ongoing concern among investors about inflation.
2. The overall level of government borrowing.
3. The vast sums technology companies are raising globally to fund AI investment, competing for the same pool of lending.¹

The Chancellor has said he intends to stick to existing fiscal rules that limit borrowing. How he balances that against pressure to ease living costs should become clearer at the Budget on 28 October.¹ An investment research director summed up the current mood by calling the figures "red lights flashing", pointing to record government debt alongside a record tax take as the backdrop.¹

This is not just a UK story. Borrowing costs in the US, Japan and Europe have hit similarly high levels in recent days, driven by the same worries over inflation, state borrowing and heavy technology spending on AI.¹ One market strategist noted that lenders are weighing up who to lend to and at what rate, as governments compete with technology firms for investor money.¹

It is worth keeping some perspective, though. If you already hold a fixed-rate deal, none of this changes your monthly payment until that deal ends, and rates can shift quickly in either direction. 

For anyone in Euxton, Leyland, Bamber Bridge or further afield across Lancashire with a fixed-rate ending soon, or planning a first purchase, it is worth reviewing options early rather than waiting for rates to move again. At Euxton Mortgage Market, we compare deals from a wide range of lenders on a fee-free basis, so advice is not tied to any single provider.

Rates can move a long way between mortgage application and completion. That is exactly why fee-free, impartial guidance matters, whether you are weighing a two-year fixed rate against a longer-term deal or want to understand what a rate rise could mean for your budget.

Get in touch with the team at Euxton Mortgage Market today and let us help you find a mortgage deal that fits your plans, whatever the markets do next.

Sources:

1 https://www.bbc.co.uk/news/articles/c8d39vq779no

All the information in this article is correct as of the date of publishing. The opinions expressed in this publication are those of the authors Euxton Mortgage Market. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

September 2026