The UK is to refinance the remaining £1.9bn of the nation’s First World War debt, chancellor George Osborne said yesterday.
The Treasury will pay off the outstanding debt from the 3.5 per cent War Loan on 9 March 2015. The 120,000 war loan bond holders will receive a cheque for the value of the bond which the government will finance through borrowing at today’s lower interest rates.
The bonds were first issued in 1917 at an interest rate of five per cent. They were changed to a rate of 3.5 per cent by chancellor at the time of Neville Chamberlain in 1932 when the UK found itself in similar economic circumstances to today.
“The coupon was lowered in 1932, because you were in a period of low rates and deflation propagated by a fixed exchange rate system in Europe,” economist Richard Batley from Lombard Street Research told City A.M.