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Gilt yields spike after PMQs: "The markets are telling the government that they lack confidence in its plan"

ended 02. July 2025

GILT yields rose after PMQs as Keir Starmer sidestepped backing Rachel Reeves following a welfare policy U-turn that hit Labour's fiscal credibility.

Pressed on whether Reeves would remain in post at the next election, Starmer dodged the question and instead took aim at Kemi Badenoch.

Brokers have warned the rise in gilt yields could see recent mortgage rate reductions reversed, while one financial expert, Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, said simply: “The markets are telling the government that they lack confidence in its plan.”

Riz Malik, Director at R3 Wealth, said rising yields could result in more pain for borrowers: "Recent mortgage rate reductions could reverse course as gilts spiked following Prime Minister's Questions. We know the markets do not like volatility, and a change in senior leadership could spook the market.

“The PM may need to save his own head, too, which takes us back to 2022. And we all know how that went.”

Ken James, Director at Contractor Mortgage Services, agreed: “We all know that the markets dislike uncertainty and they got a good dose of it today, with gilt yields rising sharply following Prime Minister’s Questions where the refusal of Sir Keir Starmer to back his Chancellor Rachel Reeves sent ripples through the benches.

"Recent gilt yield drops had been fuelling hopes of further mortgage rate reductions, and we have seen lenders cutting rates recently as they gained confidence in long-term economic stability. But today's political jitters may reverse that momentum. This is a definite political misstep and may have made the path to cheaper mortgages a little steeper.”

Michelle Lawson, Director at Lawson Financial, said: “One things the markets hate is uncertainty. There is more flip-flopping from this government than a beach on a summer's day. The damage they are doing to the economy, public pockets and consumer confidence is a great concern and the markets are reacting as a result.”

Harps Garcha, Director at Brooklyns Financial, also said rising yields could hit borrowers: "We are in a period of radical political and economic uncertainty. In recent weeks, many lenders had begun to reduce interest rates, signalling cautious optimism. However, today’s Prime Minister’s Questions have introduced fresh political uncertainty, raising the risk that rates could climb again. These unpredictable conditions highlight just how sensitive the markets are to unexpected events. For mortgage holders, this serves as a clear reminder that waiting until the last minute to act can be risky. Planning is more important than ever."

Pete Mugleston, Managing Director at Online Mortgage Advisor, said today's events could scupper any prospect of a rate cut at the next meeting: "Things go from bad to worse for this government, and the worst part is that most of the issues are entirely of their own making.

"Keir Starmer had an easy opportunity to back his Chancellor and ducked it. If he can't back her in public, what does that say about his confidence in her in private?

“The markets don't like what they see. It's remarkable that a government with such a large majority is so rudderless. It will be worth keeping an eye on gilt yields as the week progresses to see if things get any worse. If they do, that might scupper the hope of a rate cut at the next MPC meeting in August.”

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6 responses from the Newspage community

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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
The government continues to spend significant sums of money. This either needs to be raised through tax or increased borrowing. The more the government borrows, the more the market will expect in interest rate. The markets are telling the government that they lack confidence in its plan. The question the Bank of England will be asking is, would a cut in interest rates boost growth and the economy? I'm not so sure it will be enough to offset the rise in taxes on businesses.
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Harps Garcha
Director at Brooklyns Financial
We are in a period of radical political and economic uncertainty. In recent weeks, many lenders had begun to reduce interest rates, signalling cautious optimism. However, today’s Prime Minister’s Questions have introduced fresh political uncertainty, raising the risk that rates could climb again. These unpredictable conditions highlight just how sensitive the markets are to unexpected events. For mortgage holders, this serves as a clear reminder that waiting until the last minute to act can be risky. Planning is more important than ever.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Recent rate reductions could reverse course as gilts spiked following Prime Minister's Questions. We know the markets do not like volatility, and a change in senior leadership could spook the market. The PM may need a head to save his own, too, which takes us back to 2022. We all know how that went.
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Pete Mugleston
Mortgage Advisor & Managing Director at onlinemortgageadvisor.co.uk
Things go from bad to worse for this government, and the worst part is that most of the issues are entirely of their own making. Keir Starmer had an easy opportunity to back his Chancellor and ducked it. If he can't back her in public, what does that say about his confidence in her in private? The markets don't like what they see. It's remarkable that a government with such a large majority is so rudderless. It will be worth keeping an eye on gilt yields as the week progresses to see if things get any worse. If they do, that might scupper the hope of a rate cut at the next MPC meeting in August.
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Michelle Lawson
Director at Lawson Financial
One things the markets hate is uncertainty. There is more flip-flopping from this government than a beach on a summer's day. The damage they are doing to the economy, public pockets and consumer confidence is a great concern and the markets are reacting as a result.
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Ken James
Director at Contractor Mortgage Services
We all know that the markets dislike uncertainty and they got a good dose of it today, with gilt yields rising sharply following Prime Minister’s Questions where the refusal of Sir Keir Starmer to back his Chancellor Rachel Reeves sent ripples through the benches. This leaves Labour wide open for criticism given their build up pre-election on the credibility on fiscal discipline, with Reeves front and centre of that message. Any wobble especially one as public as this raise’s questions over future borrowing, spending plans and, ultimately, inflation risk. Recent gilt yield drops had been fuelling hopes of further mortgage rate reductions, and we have seen lenders cutting rates recently as they gained confidence in long-term economic stability. But today's political jitters may reverse that momentum. This is a definite political misstep and may have made the path to cheaper mortgages a little steeper.