Jeremy Hunt will hold a summit to pile pressure on Britain’s biggest banks to increase support to customers struggling with rising mortgage payments.
The chancellor will call the bosses of major lenders to Downing Street on Friday for talks on the looming crisis facing homeowners.
It is understood ministers want to ensure firms are doing everything possible to support borrowers struggling to keep up with soaring interest rates.
But the government is not expected to announce any further financial support for those struggling – believing that to do so would further fuel inflation.
Rishi Sunak has urged banks to offer “bespoke support” for those who can’t meet payments, while Mr Hunt said the government will “look at doing everything we can” to help households.
But the chancellor warned in the Commons on Tuesday: “We won’t do things that will prolong the inflationary agony that people are going through.
“Much as we sympathise with the difficulties and will do everything we can to help people seeing their mortgage costs go up, we won’t do anything that would mean we prolonged inflation.”
The average two-year fixed residential mortgage rate jumped again on Tuesday to 6.07 per cent, the latest figures from Moneyfacts showed, approaching levels seen in the wake of Liz Truss’s disastrous mini-Budget last autumn.
Homeowners remortgaging next year face an average £2,900 increase in annual mortgage costs, as lenders jack up prices in response to rising interest rates.
Ahead of a further interest rate rise expected from the Bank of England this week, Mr Sunak told ITV that the government would “stick to the plan” to halve inflation – suggesting no further support would be available.
So far, the central bank has hiked interest rates 12 times since December 2021, from 0.1 per cent to 4.5 per cent today.
Meeting lenders on Friday, Mr Hunt will seek to build on an agreement struck with banks in December to offer support to those struggling with payments.
The support included extending terms to lower monthly payments, switching to interest-only payments and a short-term reduction in payments.
The chancellor will seek to gain a better understanding of the mortgage market. And Mr Hunt said: “This week I will be meeting the principal mortgage lenders to ask what help they can give to people struggling to pay the more expensive mortgages and what flexibilities might be possible for families in arrears.”
Cabinet minister Michael Gove has suggested that mortgage rates fixed for 25 years could help ease the crisis facing homeowners facing spiralling monthly costs.
Acknowledging that it was becoming “more difficult to have access to mortgage finance”, Mr Gove that longer-term fixed deals could be the answer to ending unpredictability faced by homeowners.
“One of the things that is right for levelling up overall is making sure we can develop the types of products that are elsewhere in the world,” the levelling up secretary told The Daily Telegraph.
“Particularly countries like Canada – which are long-term, fixed-rate mortgages, so you don’t get the oscillation of how much you pay every two or five years, but you have certainty over as long as 25 years on what you pay.”
