Chancellor Jeremy Hunt is to ask banks if they can do more to support struggling households after a shock interest rate hike deepened the mortgage crisis.
He is meeting large lenders including HSBC and Santander in Downing Street on Friday as the Government comes under pressure to relieve the pain.
Prime Minister Rishi Sunak and Mr Hunt have ruled out a financial intervention as rates were hiked as the Bank of England tries to bring down stubbornly high inflation.
Labour has called for banks to be compelled to help struggling mortgage holders in a tougher response, while some backbench Tories have demanded support for under pressure borrowers.
Instead Mr Hunt is expected to use the meeting in No 11 to press lenders on whether they are living up to their commitments to offer tailored support to those struggling to pay.
Earlier this week, he said: “I will be meeting the principal mortgage lenders to ask what help they can give to people who are struggling to pay more expensive mortgages and what flexibilities might be possible for families in arrears.”
The Bank of England issued its 13th interest rate hike in a row, this time by half a percentage point from 4.5% to 5% in the sharpest increase since February.
Surprising economists who had been expecting a smaller hike of 0.25 percentage points, the move brought rates to the highest level in nearly 15 years.
The move came in an attempt to reduce inflation, which measures the rate of rising prices, which remained at 8.7% in May despite efforts to bring it down.
Sir Keir Starmer and his shadow chancellor Rachel Reeves are urging ministers to order banks to offer further support, such as temporarily allowing struggling borrowers to switch to interest-only payments or lengthen their mortgage period.
Spelling out the difference in the strategies, the Labour leader said: “The Government is urging, we are requiring. We’re saying you’ve got to do this.”
Financial markets are predicting that interest rates will strike a high of 6% by the end of the year.
There have been warnings that 1.4 million mortgage holders will lose at least a fifth of their disposable income in additional repayments.
They are set to rise by £2,900 for the average household remortgaging next year, according to economists at the Resolution Foundation.
More than 80% of homeowners with a mortgage are on fixed-rate deals, according to trade association UK Finance.
However, around 2.4 million fixed-rate mortgage deals are due to end before the end of 2024, with some potentially heading for a bill shock.
Published: by Radio NewsHub
