UK government borrowing costs are on course for their biggest ever monthly rise — and mortgage rates are set to rise as well — following the bond market meltdown triggered by Kwasi Kwarteng’s fiscal policy announcement last week.

The 10-year benchmark gilt yield has increased by 1.45 percentage points so far in September to 4.2 per cent, marking the largest monthly jump in Refinitiv data stretching back to 1979. Two-year yields have also lurched higher, from 3 per cent at the end of August to 4.5 per cent, the highest in more than 14 years. Bond yields rise when prices fall.

“The moves are just extraordinary,” said Vivek Paul, UK chief investment strategist for the BlackRock Investment Institute. “The market has delivered its verdict [on the government’s fiscal plans] and it’s not a good one.”