Britain borrowed £4.25 billion for 10 years at 5.38%, the highest rate paid on comparable borrowing since 1999, according to the Debt Management Office. Rising market yields, driven by inflation concerns and heavy government borrowing, are increasing the cost of servicing the country’s near-£3 trillion debt, equivalent to 94% of GDP. The higher rates are narrowing the government’s fiscal room before the Oct. 28 Budget and complicating plans associated with Andy Burnham and John Healey, his Chancellor, including social-care reform, council housebuilding and increased public-service spending. Rachel Reeves, Mr Healey’s predecessor, had left almost £24 billion of headroom against borrowing rules, but Citi economist Jamie Searle estimated that higher borrowing costs alone could reduce it by about £8.2 billion. The pressure is also reaching households: the average mortgage rate for homebuyers rose to 4.6% last month, while approvals fell below 55,000. The Item Club’s Matt Swannell expects the Monetary Policy Committee to raise Bank Rate in November and February, with mortgage rates remaining close to 5% through the rest of this year and into next.