Rachel Reeves isn’t telling the full truth about her spring statement. Behind the headlines and political spin, the Office for Budget Responsibility’s (OBR) forecasts reveal a troubling reality: interest rates in the UK are set to stay high – not to support households or businesses, but to attract foreign money. And while that might make wealthy overseas investors happy, it’s going to make life a lot harder for the rest of us.
A high-interest-rate trap
The OBR expects the Bank of England’s base interest rate to fall slightly to around 4% this year – and then stay flat until 2030. This 4% level is being presented as the ‘new normal’ for the cost of borrowing in the UK.
But at the same time, the OBR predicts that the cost of government borrowing – what the UK pays to borrow money through bonds – will increase to well over 5%. That’s not how things usually work. Normally, the government’s borrowing costs follow the base rate quite closely. But here, the gap is widening. Why? Because the government wants to keep bond yields high to keep foreign investors interested. In short, the UK is offering high returns to outsiders to get them to leave their money here.
Meanwhile, at home…
It’s not just the government who will be paying more to borrow. UK households are also going to be hit. According to the OBR, average mortgage interest rates are expected to rise from just under 4% today to nearly 5% by 2030. That means the cost of paying off a mortgage will go up – even though the base rate isn’t rising. At the same time, house prices are forecast to keep climbing, rising by more than 15% on top of the 25% they’ve already jumped since 2019. That’s a disaster for anyone trying to buy their first home.
The price of housing is going up, and so is the cost of borrowing to afford it. The result? A generation locked out of ownership and trapped in debt.
The real cost of borrowing
The OBR also expects inflation to fall to around 2% by 2026 and stay there. Combine that with a 4% base interest rate, and you get a ‘real’ interest rate of 2%. That’s a big deal. For much of the past decade, we’ve had negative or near-zero real interest rates to support the economy. Now, we’re looking at one of the highest real borrowing costs in recent memory.
When money is that expensive, businesses don’t invest – they cut back. Yet the OBR forecasts a boom in business investment. That’s not just optimistic – it’s completely unrealistic. And for households, the picture is even bleaker. A mortgage rate of 5% minus 2% inflation equals a 3% real interest rate – triple what we’ve been used to. That’s a punishing increase for families already dealing with rising food prices and energy bills.
Saving less, struggling more
You’d think high interest rates would encourage people to save more. But the OBR thinks the opposite will happen. They expect the UK savings rate to fall from around 10% of income to as low as 7–8%. Why? Because people simply won’t be able to afford to save. Instead, they’ll have to dip into what little they have just to stay afloat.
Dig deeper into the data and the picture becomes clearer. The OBR’s own charts show that UK households will be forced to use their savings to cover rising costs – especially interest payments on mortgages and debt. This isn’t an economic plan that supports people. It’s one that slowly drains their financial resilience.
The real beneficiaries: foreign investors
And this is where the strategy becomes obvious. The OBR expects foreign investors to become the UK’s biggest source of net savings. In plain terms, they expect the UK economy to run on money from overseas. That’s why interest rates are staying high: to attract that money. Foreign investors get a good return. The government doesn’t have to borrow as much at home. The City of London’s banks and financial institutions are happy.
But for people living in the UK? It means higher mortgage payments, stagnant wages, and squeezed living standards. We’re effectively paying rich foreigners to keep their money here – through inflated interest payments.
A policy built on punishing the public
This is the real story behind the forecasts. The government wants to keep the pound stable by attracting foreign capital. To do that, they need to keep interest rates high. But that means punishing households, starving public services of funding, and relying on fantasy-level predictions about business investment. It’s not just bad economics. It’s a conscious political choice. And it’s one that transfers wealth – from renters to landlords, from workers to investors, and from UK citizens to foreign capital.
This isn’t a sustainable economic model. It’s a high-interest, high-debt trap dressed up as stability. It benefits the few at the expense of the many. And it shows that Reeves is more focused on pleasing the markets than protecting the public.
If this is the plan, then it’s a plan to make the rich richer – and the rest of us poorer.
