Pound falls to year low as borrowing costs rise, raising mortgage rate concerns in the UK

The British Pound has fallen to its lowest level against the US dollar in over a year, dropping nearly 1% to just under 1.23 dollars. This decline comes as government borrowing costs rise, leading to warnings of increased mortgage rates. Yields on UK government bonds have surged, with 10-year gilts reaching 4.89%, the highest since 2008. The yield on 30-year gilts has also risen to 5.39%, the highest since 1998, indicating higher borrowing costs for the government. Economists suggest that these developments may force Chancellor Rachel Reeves to cut public spending or raise taxes. The Treasury maintains that UK bond markets are functioning well, despite the recent sell-off in government bonds.