10 January 2025, 12:15 | Updated: 10 January 2025, 12:39
By Emma Soteriou
Rachel Reeves’ surge in borrowing costs will lead to increased interest rates on mortgages and business loans, economists have warned.
Government borrowing costs have hit a 27-year high, sparking concerns that the UK’s economy is “flatlining”.
It is now predicted to grow by only 0.9 per cent this year – less than half the two per cent predicted at the time of the Budget.
“We expect higher yields to act as an additional headwind to growth via household remortgaging and weaker investment, with the increase of the last few days worth around 0.1 percentage point of additional growth drag this year,” James Moberly from Goldman Sachs said.
He added: “The rise in UK long-term yields in recent days is not driven by shifts in UK growth …