The cost of funds in the hard-hit interbank money markets hit peaks not seen for nearly a decade on Tuesday as the scramble for cash by financial groups showed little sign of easing.

An important borrowing benchmark for investors, the three-month London interbank offered rate (Libor), climbed to 6.90375 per cent in the sterling market, up from 6.89625 on Monday, leaving it 115 basis points above the Bank of England’s base rate of 5.75 per cent and at the highest level seen since November 1998.