# UK 10-year gilt yields spike again

By Susannah Streeter — 2026-05-05

Susannah Streeter, chief investment strategist at Wealth Club, said: “UK gilt yields have edged even higher as painful energy prices and the tense Middle East situation mean multiple interest rate hikes look likely.

“There’s also unease ahead of the local elections, with Labour expected to take a drubbing in the polls.

“This could potentially weaken Keir Starmer’s position further, and investors in UK government debt are uneasy, given worries that a replacement might cause the government to veer into a less fiscally responsible spending direction.

“The 10-year gilt yield rose above 5.05 per cent briefly, a level it hit earlier in March, but it hasn’t been seen since the Global Financial Crisis that yields hovered around this level, above five per cent.

“Rising gilt yields mean it’s becoming more expensive for the government to finance UK debt, which puts pressure on current budgets.

“At a time when calls are growing for extra support for cash-strapped households and businesses, higher borrowing costs mean the Treasury’s room for manoeuvre is shrinking, with more revenue being absorbed by debt interest payments.

“This may force increasingly difficult choices – higher taxes or tighter public spending elsewhere.

“The burden of higher taxes on businesses has already been blamed for reluctance among employers to take on younger staff.

“If borrowing costs remain elevated, it also reduces the likelihood of tax cuts that might otherwise have helped support growth and the labour market.

“Rising yields also act as a red flag for the mortgage market, given that banks and lenders price many loans off these market moves.

“Fixed-rate mortgages are closely linked with swap rates, which in turn tend to move closely with gilt yields.

“As yields have risen, some of the cheaper deals have been pulled, and lenders are likely to remain cautious about the path ahead.

“Shares in housebuilders have been on the back foot in early trade, as investors assess what the repercussions could be for the housing market.

“Gilt yields are also used to price other forms of borrowing, meaning they can make the cost of major investment projects significantly more expensive.

“This can lead companies to mothball large-scale plans, with knock-on effects across supply chains as spending is curtailed, growth stalls, and job prospects are dented.”

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